Exercise 12-3 Best Buy Store (ss based on CSL)

Weekly demand for Motorola cell phones at a Best Buy store is normally distributed with a mean of 300 and a standard deviation of
200. Motorola takes two weeks to supply a Best Buy order. Best Buy is targeting a CSL of 95 percent and monitors its inventory
continuously. How much safety inventory of cell phones should Best Buy carry? What should its ROP be?

Continuous Review

Wkly SD of d LT SD of LT DDLT
μd σd μLT σLT μDDLT σDDLT CSL ss ROP
300 200 2 0 600 282.8427 0.95 466 1066
=𝜇 ×𝜇 = 𝜇 ×𝜎 =NORMSINV(CSL)⨉σDDLT =µDDLT+ss
Exercise 12-4 Best Buy Store (Periodic Review)
Reconsider the Best Buy store in Exercise 3. The store manager has decided to follow a periodic review policy to manage
inventory of cell phones. She plans to order every three weeks. Given a desired CSL of 95 percent, how much safety inventory
should the store carry? What should its OUL be?

Periodic Review

Ord Perd Wkly SD of d LT SD of LT DD(T+LT)

T μd σd μLT σLT μDD(T+LT) σDD(T+LT) CSL ss OUL
3 300 200 2 0 1500 447.2136 0.95 736 2236
= 𝜇 × (𝑇 + 𝜇 ) = 𝑇+𝜇 ×𝜎 =NORMSINV(CSL)⨉σDD(T+LT) =µDD(T+LT)+ss
Exercise 12-6 Sam's Club Store (ss and CSL based on current policy)
Weekly demand for HP printers at a Sam's Club store is normally distributed, with a mean of 250 and a standard deviation of 150. The
store manager continuously monitors inventory and currently orders 1,000 printers each time the inventory drops to 600 printers. HP
currently takes two weeks to fill an order. How much safety inventory does the store carry? What CSL does Sam's Club achieve as a
result of this policy?

Continuous Review

Wkly SD of d LT SD of LT DDLT Given

μd σd μLT σLT μDDLT σDDLT CSL ss ROP
250 150 2 0 500 212.132 0.681324056 100 600
=𝜇 ×𝜇 = 𝜇 ×𝜎 =NORMDIST(ROP,μDDLT,σDDLT,1) = 𝑅𝑂𝑃 − 𝜇
Exercise 12-7 Sam's Club Store (ss based on CSL)
Return to the Sam's Club store in Exercise 6. Assume that the supply lead time from HP is normally distributed with a mean
of 2 weeks and a standard deviation of 1.5 weeks. How much safety inventory should Sam's Club carry if it wants to provide
a CSL of 95 percent? How does the required safety inventory change as the standard deviation of lead time is reduced from
1.5 weeks to zero in intervals of 0.5 weeks?

Continuous Review

Wkly SD of d LT SD of LT DDLT
μd σd μLT σLT μDDLT σDDLT CSL ss ROP
250 150 2 1.5 500 430.8422 0.95 709 1209

σLT ss 800
1.5 709
1.4 674 700
1.3 639 600
1.2 605
1.1 572 500
1 540
0.9 509 400
ss

0.8 480
0.7 453 300
0.6 428
200
0.5 405
0.4 386 100
0.3 371
0.2 359 0
0.1 352 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6
0 349 Std Deviation of Lead Time (sL)