The fraction of demand met from inventory

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A company tries to reduce all lead-times by 50 percent. There is a discussion concerning the impact of this change. As an example, an item in stock is considered. Demand is continuous and normally distributed. Inventory control is carried out by a (Q,r) policy with continuous review. The demand per week has mean 200 and standard deviation 50. Demands during different weeks are independent. Currently, the lead-time is four weeks and r=850 and Q = 600. Two questions have been raised.

a. What is the current fill rate (i.e., the fraction of demand met from inventory)?

b. Assume that the lead-time is reduced to two weeks, while r and Q are unchanged. What is the fill rate? Note: Whenever needed, use the following approximation for the fill rate:

Reference no: EM13257090

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