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Your cookie supplier delivers roughly five days after you place your order. Daily demand follows a...

Your cookie supplier delivers roughly five days after you place your order. Daily demand follows a normal distribution with mean 100 and standard deviation 15. E[d] = E(D daily) = 100 bags, σD daily = 15 bags E(LT) = 5 days, σLT = 1 day What reorder point should you use if you want a 97.5% in-stock rate?

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Reorder point is the quantity level that is reached when the inventory on hand drops to this level. The four determinants of the reorder point quantity are the usage rate, lead time, demand variability, lead time variability and the degree of stock out risk.

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