Question

In: Operations Management

Abraham’s Eatery uses a lunch box supplier that has a sales rep come by weekly to...

Abraham’s Eatery uses a lunch box supplier that has a sales rep come by weekly to order boxes. Abraham wants a 98% service level. Abraham’s average daily demand is 100 lunches, with a daily standard deviation of 17 lunches. The lead time for lunch box purchases is 4 days. If there are 400 lunch boxes when the rep comes by, how many boxes should be ordered?

A. 830
B. 1,216
C. 793
D. 816
E. Do not have enough information to answer the question

Solutions

Expert Solution

We have the following info

T = 7

z = 2.05 for 98% service level

d = 100

σ = 17

L = 4

I = 400

Order quantity for periodic review system is given by

d*(L + T) + z*σ*sqrt(L + T) - I

Or,

100*(4+7) + 2.05*17*sqrt(4+7)-400 = 815.58

Rounding up we can order 816 units

Correct answer: 816 units

keosha answered 2 years ago
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