Variability of demand seem to have on buffer stock

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Reference no: EM1312012

Q. Daily demand for chocolate syrup for a local chain of fast food restaurants is normally distributed with a mean of 30cans/day also a standard deviation of 28 cans. Supply is virtually certain with a lead time of 2 days; the cost of placing an order is $2.50 also annually carrying charge are 80% of the unit price of $.60/can. A 98% service level is desired. Service level is interpreted as the probability that there will be stock out of any size during lead time. The restaurant chain serves 365 days a year.

a) Illustrate what is the operating doctrine for Chocolate syrup?

b) Illustrate what is the annual cost for chocolate syrup buffer stocks?

c) Illustrate what impact does the variability of demand seem to have on buffer stock?

Reference no: EM1312012

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