What is the expected backorder

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Reference no: EM133279651

Case: Weekly demand for Vespa at a retail store is normally distributed, with a mean of 12 and a standard deviation of 5. As this is the only Vespa retailer , any unmet demand is backordered. The store manager follows a periodic review policy with an inventory review period of one week and targets for a customer service level (CSL or instock probability) of 95%. The manufacturer of Vespa currently takes three weeks to fill an order. The store operates 52 weeks per year.

Question 1: What should the store's order-up-to (OUT) level be?

Question 2: What is the expected backorder?

Question 3: What is the expected on-order inventory? (Recall, your on-order inventory is also called pipeline inventory). (5 points)

Question 4: What is the expected on-hand inventory?

Question 5: What fill rate (FR) does the store achieve?

Question 6: The purchasing cost is €1,500 per vehicle, while the store manager has estimated that the penalty per unit backordered is €100 and the annual inventory carrying cost is around 25%.

Question 7: If the manager wishes to minimize holding and backorder penalty costs, what should be her target in-stock probability (CSL)?

Question 8: What should its OUT level be in this case?

Reference no: EM133279651

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