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Consider a periodic review system, where orders are placed every 14 days. The firm strives to provide a 96.5% cycle service level. Demand averages 400 units per day, and the standard deviation of demand per day is 84 units. Lead time is 10 days.
a. How many units of safety stock should be held?
b. What should the target inventory level (order-up-to level) be?
c. Suppose that it is time to review the item. There are 170 units in inventory, and there is an outstanding backorder for 300 units. An order for 88 units is on the way. How many units should be ordered now?
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