a) Which of the two inventory management methods; Re-Order Point (continuous review) and Periodic Review, will in general have a lower average inventory at a given service level? Why?
b) A bookshop estimates that the average demand for a popular notepad is 12,000 notepads per week with a standard deviation of 3000 notepads. The current inventory policy calls for replenishment orders of 156,000 notepads. The average lead-time from the distribution is 5 weeks with a standard deviation of 2 weeks. If management wants a 95 percent service level, what should the reorder point be?