Nationwide Auto Parts uses a periodic review inventory control system for one of

Question

Nationwide Auto Parts uses a periodic review inventory control system for one of its stock items. The review interval is 9 weeks, and the lead time for receiving the materials ordered from its wholesaler is 5 weeks. Weekly demand is normally distributed, with a mean of 150 units and a standard deviation of 30 units. Refer to the a. What is the average and the standard deviation of demand during the protection interval? The average demand during the protection interval is 2100 units. (Enter your response as an integer.) The standard deviation of demand is 112.23 units. (Enter your response rounded to two decimal places.) b. If the firm desires 98 percent stockout protection, the target inventory level is 2331 units. (Enter your response rounded to the nearest whole number.) c. If 300 units were in stock at the time of a periodic review.units should be ordered. (Enter your response rounded to the nearest whole number.) for z-values.

Explanation / Answer

Protection interval = 9+5 = 14 weeks

Average demand during protection interval = 14*150 = 2100 units

Standard deviation of demand = Square root of 14 * 30 = 112.23 units

Target inventory (Service level at 98% z =2.054) = 2100 + (2.054)*112.23 = 2331 units

Order quantity = Target inventory - Peroidic review = 2331 - 300 = 2031 units

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