Example 3: Demand for skis at Sportmart is normally distributed with a mean of u=350 and a standard deviation of o=100.The manager has decided to order 450 pairs of skis for the upcoming season.Evaluate the expected overstock and understock as a result of this policy. Example 4:Cost of Stockout from Inventory Policy Weekly demand for detergent at Wal-Mart is normally distributed,with a mean of u=100 gallons and standard deviation of o=20 gallon.The replenishment lead time is L=2 weeks.The store manager at Wal-Mart orders 400 gallons when the available inventory drops to 300 gallons.Each gallon of detergent costs $3.The holding cost Wal-Mart incurs is 20 percent.If all unfilled demand is backlogged and carried over to the next cycle,evaluate the cost of stocking out implied by the current replenishment policy. Example 5 Consider the situation in Example 4 but make the assumption that all demand during a stockout is lost. Assume that the cost of losing one unit of demand is $2.Evaluate the optimal cycle service level that the store manager at Wal-Mart should target. Example 6 Consider a buyer at Bloomingdale's who is responsible for purchasing dinnerware with Christmas patterns The dinnerware sells only during the Christmas season,and the buyer places an order for delivery in early November.Each dinnerware set costs c=$100 and sells for a retail price ofp =$250.Any sets unsold by Christmas are heavily discounted in the post-Christmas sales and are sold for a salvage value of s $80. The buyer has estimated that demand is normally distributed,with a mean ofu =350.Historically,forecast errors have had a standard deviation of o =100.The buyer has decided to conduct additional market research to get a better forecast.Evaluate the impact of improved forecast accuracy on profitability and inventories as the buyer reduces o from 150 to 0 in increments of 30.Example 3: Example 4: Cost of Stockout from Inventory Policy Weekly demand for detergent at Wal-Mart is normally distributed, with a mean of μ = 100 gallons and standard deviation of σ = 20 gallon. The replenishment lead time is L = 2 weeks. The store manager at Wal-Mart orders 400 gallons when the available inventory drops to 300 gallons. Each gallon of detergent costs $3. The holding cost Wal-Mart incurs is 20 percent. If all unfilled demand is backlogged and carried over to the next cycle, evaluate the cost of stocking out implied by the current replenishment policy. Example 5 Consider the situation in Example 4 but make the assumption that all demand during a stockout is lost. Assume that the cost of losing one unit of demand is $2. Evaluate the optimal cycle service level that the store manager at Wal-Mart should target. Example 6 Consider a buyer at Bloomingdale’s who is responsible for purchasing dinnerware with Christmas patterns. The dinnerware sells only during the Christmas season, and the buyer places an order for delivery in early November. Each dinnerware set costs c = $100 and sells for a retail price of p = $250. Any sets unsold by Christmas are heavily discounted in the post- Christmas sales and are sold for a salvage value of s _ $80. The buyer has estimated that demand is normally distributed, with a mean of μ = 350. Historically, forecast errors have had a standard deviation of σ = 100. The buyer has decided to conduct additional market research to get a better forecast. Evaluate the impact of improved forecast accuracy on profitability and inventories as the buyer reduces σ from 150 to 0 in increments of 30