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You would like to develop an inventory ordering policy of a 95% probability of not stocking out. Demand for the products is 7000 units per year. Your store opens 350 days a year. Every three weeks (21 days) inventory is counted and a new order is placed. It takes 10 days for the products to be delivered. Standard deviation of daily demand is 5 units. You have 200 units on hand right now.
a. How many should you order for the current review period?
b. If management decide to change the service level to 99% (which means 99% probability of not stocking out), how many should you order?
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