Question

If you use a Periodic Review system to manage inventory with a demand averaging 110 units a week and a standard deviation of 14 units, and the lead time is 2 units, what is the order interval for this inventory item?

Answer 1

The order interval for managing inventory using a Periodic Review system is 1542 units.

Step-by-step explanation:

The order interval for managing inventory using a Periodic Review system can be calculated using the formula:

Order Interval = Lead Time + Safety Stock

The lead time in this case is given as 2 units. The safety stock is determined by multiplying the demand averaging by the standard deviation: Safety Stock = Demand Averaging * Standard Deviation

Therefore, Order Interval = 2 + (110 * 14) = 2 + 1540 = 1542 units.