Continuous Review Policy: Assumptions Daily demand is random,follows a normally distribution Fixed order cost plus a cost proportional to amount ordered Inventory holding cost is charged per item per unit time If an order arrives and there is no inventory on hand,the order is lost The distributor has a required service level This is expressed as the likelihood that the distributor will not stock out during lead time. Intuitively,how will this affect our policy?„ Daily demand is random, follows a normally distribution „ Fixed order cost plus a cost proportional to amount ordered „ Inventory holding cost is charged per item per unit time „ If an order arrives and there is no inventory on hand, the order is lost „ The distributor has a required service level „ This is expressed as the likelihood that the distributor will not stock out during lead time. „ Intuitively, how will this affect our policy? Continuous Review Policy: Assumptions