1. A company replenishes its inventory using a periodic review system, and it uses the service factor Z to calculate the safety stock required for its target in-stock rate. What are the implications of a negative service factor Z < 0?
At the end of the order interval, the company is likely to be out of stock
Only the absolute value of Z matters, since the normal distribution is symmetric
At the end of the order interval, the company will always be out of stock
Using a negative Z is mathematically not allowed in this calculation, because it is akin to division by 0
2. A newsvendor has a contract for delivering D newspapers per day to the office of a large organization; daily demand is fixed and guaranteed. Which of the following is true?
The optimal order quantity is D for any critical fractile
The optimal order quantity is D times the critical fractile
The critical fractile is exactly 1
The critical fractile is exactly 0
3. Explain in three to four well-constructed sentences the need for a business to conduct market research.