Question: The Co-op has discovered that it should establish a safety stock for its sweatshirts. It wants to use a reorder point system with a two-week lead time. The demand over a two-week interval has an average of 450 units and a standard deviation of 250 units.
a. What reorder point should the Co-op establish to ensure a 95 percent service level for each order placed?
b. What reorder point should be established to ensure that no more than one stockout occurs in the course of a year?
c. How much average inventory will the Co-op carry for part b? Include both cycle inventory and safety stock in your answer.
d. How often will the Co-op turn over its inventory, using the results from part c?