Faisal Al Gharabally OM- 5 - HW

Weeks in Year: 50 Mean demand per week: 1000 units SD of Demand: 300 units Replenish lead time (LT): 4 weeks

Fixed Price per order (S): $25 Holding cost (Annual): $0.10/unit Service Level: 99.5% Q = √(2DS/H) = √(2*1000*25/0.002) = 5,000 ROP = Mean demand*LT+Z*SD*√LT Where, Z is the corresponding value for 99.5% service level in Gaussian distribution. = 1000*4 + 2.58*300*√4 = 5548 For ROP = 4000 units, Z =[4000-(1000*4)] / 300*√4 =0 Corresponding Service level = 50%

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