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SC, Supply Chain Management

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Suppose Norwitch has worked out a new contract, accepted by all its customers, of being allowed up to one week to satisfy each demand. Norwitch still uses a 99% “fill rate” as a target service measure. However, stockouts satisfied within a week is considered as good as demand satisfied from the on-hand inventory.

How would you modify the logic of computing the re-order point, s, to take account of the one-week grace period? Sketch the average behavior of the (s,Q) system to illustrate your reasoning. (8 points)

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