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The weekly use of paper tissue at a restaurant is normally distributed with an average of 80 bags and a variance of 9 bags per week. The lead time for ordering new paper tissues is 2 weeks. Assume the restaurant opens 50 weeks a year.
2. If the ordering cost is $40 and inventory carrying cost is $2 per bag per year, how much paper tissues should the restaurant manager order each time?
3. In order to limit the stockout risk to be no more than 1%, at what level of inventory should the manager places an order?
4. Suppose the lead time now becomes random and is normally distributed with a mean of 2 weeks and a standard deviation of 0:3 weeks. The manager still chooses the safety stock obtained from part 3. What is the stockout risk now?
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Suppose the company wants to maintain the current level of safety stock found in part (a) for the new (one DC) option also. What will be the new Service Level to its customers in that case?
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