Kelly opens an aquarium store in a lively shopping mall and finds business to be booming, but she often stocks out of key items customers want. She decides to experiment with inventory control methods such as using a fixed order quantity (FQS) and/or fixed order period (FPS) systems. The Fluval 303 pump, a high margin and profitable pump, is one of her best sellers, but it stocks out frequently. She collects the following data about the pump’s sales.
Demand = 10 units per week Store operates 45 weeks/year
Order cost = $30/order Lead time = 3 weeks
Item cost = $80/pump Standard deviation of weekly demand = 4 units
Inventory-holding cost = 15% per year Desired service level = 90 percent
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