Question: A sporting goods company has a distribution center that maintains inventory of fishing rods. The fishing rods have the following demand, lead time, and cost characteristics: Average demand = 100 units per day, with a standard deviation of 12 units Average lead time = 12 days with a standard deviation of 2 days 250 days per year Unit cost = $25
Desired service level = 95%
Ordering cost = $50
Inventory carrying cost = 20%
The basic question: How many fishing rods should the distribution center carry to provide the desired service level? There are, of course, many other specific questions, such as EOQ? Average cycle stock?