Dans Dog Diner (DDD) is a low-key restaurant selling hot dogs and a long-time neighborhood favorite. DDD keeps an inventory of its best-selling product, the foot-long Frankfurter, in the freezer and reorders as needed when inventory runs low. Specifically, Dans rule of thumb is to place another order when there are only 100 sausages left. Average daily demand is 30 units with a standard deviation of 10 units, and the average replenishment lead time is two days with a standard deviation of 1 day. Lately, Dan has noticed that he runs out of foot-long Frankfurters nearly three times a month, on average. Wanting to keep his customers happy, Dan decides to strive for a 99% in-stock rate moving forward. By how many units will Dan have to increase safety stocks to achieve this goal?
Rosie Reynolds is the owner of Rosie’s Roses, a flower shop located just off of the historic town square. Business has not been rosy lately (no pun intended). Sales have plummeted as disgruntled would-be customers frequently leave the store when their preferred flowers are not in stock. At the same time, costs have soared as Rosie has had to dispose of unsold flowers at an increasing rate. Rosie realizes that she needs help making smarter ordering decisions. Rosie buys roses at a wholesale market for $2.25 a piece and resells them for a unit price of $4.20. Any roses that go unsold are disposed of at a community bio-waste facility at a cost of $0.15 per unit. Looking at Rosie’s sales records from last month, you find that average daily demand is 62 roses with a standard deviation of 14 roses. How many roses should Rosie order each day?