Need Help With Inventory Model Lesson.
This is a business inventory planning situation with both variable demand and variable lead time.
You must ensure to use the right approach because there are also safety stock methodologies and equations for only one item being variable and the other being constant.
You must ensure that the actual data you use (demand and lead time) are expressed in identical time units, not a mix of weeks and days, for example.
Also, the historical data given, while relatively large, is still a sample from an entire year. So, when you compute the necessary standard deviations of demand and of lead times, calculate standard deviations of a sample, not a population.
When using Excel use the STDEV.S function (not STDEV.P). When using a calculator, divide by the sample size minus one (n-1); (for a population you divide by the population size (N)). That is, compute the standard deviations as:
