Weekly demand for HP printers at a Costco store is normally distributed with a mean of 550 and a standard deviation of 150. The store manager continuously monitors inventory and currently orders 1,000 printers each time the inventory drops to 750 printers. HP currently takes three weeks to fill an order. How much safety inventory does the store carry? What CSL does the store achieve under the current policy?
In the above problem, assume that the supply lead time from HP averages two weeks with a standard deviation of 1.5 weeks. How much safety inventory should Costco carry if they want to provide a CSL of 90 percent? How does the required safety inventory change as the standard deviation of the lead time is reduced to zero in intervals of 0.5 weeks?