Little Caesars Pizza orders all of its pepperoni, olives, anchovies, and mozzarella cheese to be shipped directly from Italy. An American distributor stops by every four weeks to take orders. Because the orders are shipped directly from Italy, they take three weeks to arrive.
Little Caesars Pizza uses an average of 150 pounds of pepperoni each week, with a standard deviation of 30 pounds. Little Caesars prides itself on offering only the best quality ingredients and a high level of service, so it wants to ensure a 98 percent probability of not stocking out on pepperoni.
Assume that the sales representative just walked in the door and there are currently 500 pounds of pepperoni in the walk-in cooler. How many pounds of pepperoni would you order?
What is the standard deviation of demand during the review period and lead-time?
How many pounds of pepperoni would you order?