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In: Operations Management

Acme inc uses an inventory management system where orders are placed every 30 days and the...

  1. Acme inc uses an inventory management system where orders are placed every 30 days and the average lead time is 11 days. The average daily demand is 10 units, the standard deviation of demand is 2 units, and there are currently 110 units in stock. The required service level is 95%. Find the order quantity.

Solutions

Expert Solution

At 95% service level, value of Z = 1.645

So,

Order quantity = daily demand*(Order interval + lead time) + Z*SD*(Order interval+ Lead time)^.5 - available stock

Order quantity = 10*(30+11) + 1.645*2*(30+11)^.5 - 110

Order quantity = 321.07 units or 321 units

keosha answered 2 years ago
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