Sam places an order for Cheetos every three weeks for a small independent grocery store. Once the order is placed, delivery to the store typically occurs in one week. Average demand is 100 bags per week and the standard deviation of demand is 20 bags per week.
The store policy is to stock an amount of inventory that allows for an average stockout condition of 10 percent while waiting for replenishment.
A new employee who studied SCM has suggested to Sam that it would be less expensive overall to run this system as a continuous inventory management system. Is this a correct statement?