Weekly demand for avocados at the Guac Shop is normally distributed with a mean of 2500 and a standard deviation of 650
The store manager has decided to follow a periodic review policy to manage inventory of avocados. They plan to order every two weeks. The farmers currently take two weeks to fill an order. Given a desired CSL of 97.5 percent, how much safety inventory should the Guac Shop carry? What should their OUL be?
What will be an ideal response?
Answer:
ss = Fs-1(CSL) × σT + L
= NORMSINV(0.975) × (650 × )
= 2547.95 ≈ 2548
OUL = DT + L + ss
= 2500(4) + 2548
= 12,548
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