(**) For problem 4, suppose that the standard deviation of demand during the 13-day period drops…

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

Problem 4:

4. (*) Jimmy’s Delicatessen sells large tins of Tom Tucker’s Toffee. The deli uses a periodic review system, checking inventory 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. Calculate the restocking level. Assume that the desired service level is 90%.