Question

We have an item that we stock in our store that has fairly steady demand. Our supplier insists that we buy 1,200 units at a time. The lead time is very short on the item since the supplier is only a few blocks away and we can pick up another 1,200 units when we run out. How many units do you expect to have in inventory on average?

Short answer

Answer

Inventory control systems are so large that they are not practical to model and provide a radical treatment to every item. However, it's useful to categorize the items in line with their yearly volume.

Step-by-step solution

Definition of Average inventory

Average inventorymay be a calculation that estimates the worth or number of a specific good or set of products during two or more specified periods. Average inventory is the mean of inventory within a specific time, which can vary from the median value of the identical data set, and is computed by averaging the starting and ending inventory values over a specified period.

Explanation

Since the inventory is not stocked

The inventory acquired is 1200

The supplier insists on the acquisition of another = 1200 (in case of running out of old stock)

$\mathrm{So},\mathrm{expected}\mathrm{average}\mathrm{inventory}=\frac{1200}{2}=600\mathrm{units}$