You are the inventory manager for a large medical supplies distributor near the medical center. One of your critical inventory items is an arterial clamp used in emergency surgery. Daily demand for clamps is normally distributed with a mean of 680 and a standard deviation of 300. Your lead time is 4 days, and you order replenishments daily.
A. If your order up to level is 3000, and your current inventory level is 2,700, and you have 320 on order, how many clamps will you order?
B. Now suppose your order up to level is 3000, your current inventory level is 1,700, and you have 500 on order, how many clamps will you order?
C. What is your optimal order-up-to level assuming you want to target 95% in-stock probability?
D. What is your optimal order-up-to level assuming you want to target 99% in-stock probability?
E. What is your optimal order-up-to level assuming you want to target a 99% fill rate?
F. Suppose you do an analysis and determine that for each clamp order that can’t be filled you lose $20 profit, but for each clamp that you have extra in inventory you lose $50. What is your optimal order-up-to-level?