Jimmy’s Delicatessen sells large tins of Tom Tucker’s Toffee. The deli uses a periodic review system, checking in-ventory levels every 10 days, at which time an order is placed for more tins. Order lead time is 3 days. Average daily demand is 7 tins, so average demand during the reorder period and order lead time (13 days) is 91 tins. The standard deviation of demand during this same 13-day period is 17 tins.

a. (*) Calculate the restocking level. Assume that the desired service level is 90%.

 b. (**) Suppose that the standard deviation of demand during the 13-day period drops to 4 tins. What happens to the restocking level? Explain why.

c. (***) Draw a sawtooth diagram similar to the one in Figure 11.3. Assume that the beginning inventory level is equal to the restocking level and that the demand rate is a constant 7 tons per day. What is the safety stock level? (Hint: Look at the formula for calculating restocking level.) What is the average inventory level?


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