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During the spring, the demand for electric fans at a large home-improvement store is quite strong. The company tracks inventory using a computer system so that it knows how many fans are in the invent

During the spring, the demand for electric fans at a large home-improvement store is quite strong. The company tracks inventory using a computer system so that it knows how many fans are in the inventory at any time. The policy is to order a new shipment of 250 fans when the inventory level falls to the reorder point, which is 150. However, this policy has resulted in frequent shortages and thus lost sales because both lead time and demand are highly variable. The manager would like to reduce the incidence of shortages so that only 5% of orders will arrive after inventory drops to 0 (resulting in a shortage). This policy is expressed as a 95% service level. From previous periods, the company has determined that demand during lead time is normally distributed with a mean of 200 and a standard deviation of 50. Find the reorder point

Jun 22 2020 View more View Less

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