The local Giant store uses a periodic review model to stock their paper towels.
ID: 374731 • Letter: T
Question
The local Giant store uses a periodic review model to stock their paper towels. After collecting some data, the firm was able to establish that the daily demand for paper towels is 25 packs. The store reviews its inventory once a week and places an order on Sunday. The inventories for each week at the time of order placement are given below in the table. The lead time to get the product from the local distribution center is 2 days.
Week
Leftover Inventory
Week 1
24
Week 2
36
Week 3
52
Week 4
17
Week 5
34
What should be the order quantities for Week 1?
What should be the order quantity for Week 2?
What is the order quantity for Week 3?
What is the order quantity for Week 4?
What is the order quantity for Week 5?
Week
Leftover Inventory
Week 1
24
Week 2
36
Week 3
52
Week 4
17
Week 5
34
Explanation / Answer
Restocking level, S = Daily demand * (Review period + Lead time) = 25 * (7 + 2) = 225
Order quantity, Q = Restocking level - Inventory position
Inventory position, IP = On hand (or leftover) inventory + On order - Backorders
Order quantity for week 1 = S - IP = 225 - 24 = 201
Order quantity for week 2 = S - IP = 225 - 36 = 189
Order quantity for week 3 = S - IP = 225 - 52 = 173
Order quantity for week 4 = S - IP = 225 - 17 = 208
Order quantity for week 5 = S - IP = 225 - 34 = 191
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