Company’s average monthly demand for cell phone cases = ( 2203 + 2392 + 1194 + 1

Question

Company’s average monthly demand for cell phone cases

= ( 2203 + 2392 + 1194 + 1207 + 1159) / 5

= 8155/5

= 1631

AVERAGE MONTHLY DEMAND FOR CELL PHONE CASES = 1631

Given,

Frequency of periodic review = T = 1 month

Lead time of order placement =L = 1 month

Hence, Protection period = P = T + L =1 + 1 = 2 months

Given,

Standard deviation of monthly demand = 612.3

Therefore, Standard deviation of demand during Protection Period

= 612.3 x Square root ( 2 )

= 612.3 x 1.414

= 865.79

Given,

Service level = 95% ( 0.95)

Hence , Z value = NORMSINV ( 0.95) = 1.6448

Therefore,

Safety stock = Z value x standard deviation of demand during protection period

                       = 1.6448 x 865.79

                        = 1424.05 ( 1425 rounding to next higher whole number )

Hence , Restocking level

= Average Monthly demand x Protection period + Safety stock

= 1631 X 2 + 1425

= 3262 + 1425

= 4687

APPROPRIATE RESTOCKING LEVEL = 4687

When there are 1350 cell phone cases on hand,

Number of cell phone cases to be ordered

= 4687 – 1350

= 3337

3337 CELLPHONE CASES ARE TO BE ORDERED

AVERAGE MONTHLY DEMAND FOR CELL PHONE CASES = 1631

Explanation / Answer

Problem 3: Periodic Review System Cell phone cases aren't the most critical product the Verizon store sells. Therefore, they use a monthly periodic review system to manage this inventory. Assume the reorder period plus lead time is one month. Below is the sales data for cell phone cases for the last 5 months. Month June'17 Jul'17 Aug'17 Sept'17 Oct'17 Units Sold 2203 2392 1194 1207 1159 a) b) What is the company's average monthly demand for cell phone cases? Assume the monthly standard deviation of demand is 612.3 cell phone cases and the company wants to be in stock at least 95% of the time. what is the appropriate restocking level? c) If there are currently 1350 cell phone cases on hand when an order is placed, how many cell phone cases should be ordered? |

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