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The company Kiwi Key sells boxes of a weed-killer and places order to its supplier based on a periodic review of its inventory. The review period is 1 week, and the lead-time to receive the shipment from the supplier is 2 weeks. Kiwi Key sells on average 75 boxes per week, with a standard deviation of weekly demand of 25 boxes. Currently, the base stock level (B) Kiwi Key uses in its periodic review is 300 boxes.
a) What is the service level provided by Kiwi Key given their current base stock level of 300 boxes?
b) Given this inventory management policy, what is the expected average inventory at Kiwi key?
In the spring season, demand for weed-killer increases but also becomes more highly variable: weekly demand in the spring is 90 boxes per week, with a standard deviation of weekly demand of 60 boxes.
c) What is the service level in the spring, if Kiwi Key keeps its base stock level at 300 boxes?
d) What should be the base stock level changed to during the spring season to achieve a service level of 95%?
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