Computing Re-order Quantity - Inventories for production cycle.
The home appliance department of a large department store is using a continuous review policy to control the replenishment of a particular model of radio. Daily demand for the radio is normally distributed, with a mean of 300 and a standard deviation of 100. The wholesaler can process a replenishment request in 2 days. The current replenishment policy is to order 1500 units when there are 750 units on hand.
1. What is the cycle service level that the store achieves with this policy?
2. What is the fill rate that the store achieves with this policy?
3. Suppose the store wants to adjust its reorder point from 750 to achieve a fill rate of 99.9%. What reorder point should it use?