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10 pts) DoorRed Pharmacy replenishes one of its best-selling drugs using a continuous review policy. Daily demand for the drug is normally distributed, with a mean of 300 and a standard deviation of 100. The wholesaler can process a replenishment request in two days. The current replenishment policy is to order 1,500 units when there are 750 units on hand. a) What is the cycle service level and fill rate that DoorRed achieves with its policy

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Solution :

In the context, it is stated that the DoorRed Pharmacy reloads or replenishes its best selling drug by a policy of continuous review.

Mean daily demand = 300

Standard deviation of daily demand = 100

Replenishment lead time = 2

Reorder point = 750

Order quantity = 1500

Therefore, Safety inventory = 150

Standard deviation of demand during lead time = 141. 42%

Cycle service level = 85.56 %

The cycle service level and fill rate that door red achieves with its policy is :

Cycle service level = 85.56 %

DoorRed Pharmacy

What all information we have ?

Mean daily demand = 300

Standard deviation of daily demand = 100

Replenishment lead time = 2

Reorder point = 750

Order quantity = 1500

Safety inventory = Reorder point -Mean daily demand - Order quantity

Safety inventory = 750 - 300-1500 - 100

Safety inventory = 150

Standard deviation of demand during lead time = 141. 42%

Cycle service level = 85.56 %

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