Exercise 12-4: Best Buy
Inputs
Average demand per unit time, D = 300
Lead time, L = 2
SD of demand per unit time, σD = 200
Review interval, T = 3
Target cycle service level (CSL) 0.95
Distribution of Demand during T + L
Mean demand during T+L, DT+L = 1,500
SD of demand during T+L, σT+L = 447
Outputs
Safety inventory, ss = 736
Order up to level, OUL = 2,236
Reconsider the Best Buy store in Problem 1. The store manager has
decided to follow a periodic review policy to manage inventory of cell
phones. They plan to order every three weeks. Given a desired cycle
service level of 95 percent, how much safety inventory should the store
carry? What should their order up to level be?
Exercise 12-4: Best Buy
Inputs
Average demand per unit time, R = 300
Lead time, L = 2
SD of demand per unit time, sR = 200
Review Interval, T = 3
Target cycle service level 0.95
Distribution of Demand during T + L
Mean demand during T+L, (T+L)R = =C13*(C14+C16)
SD of demand during T+L, sT+L = =C15*SQRT(C14+C16)
Outputs
Safety inventory, ss = =NORMSINV(C17)*C21
Order up to level, OUL = =C20+C24
Reconsider the Best Buy store in Problem 1. The store manager has decided to follow a periodic review policy to manage
inventory of cell phones. They plan to order every three weeks. Given a desired cycle service level of 95 percent, how
much safety inventory should the store carry? What should their order up to level be?….