The Drug Store carries Deodorant R, which has an expected demand of 15,000 jars per year (or 60 jars per day with 250 days per year). Lead time from the distributor is three days. It has been determined that demand in any 3-day period exceeds 200 jars only once out of every 100 3-day periods.
This outage level (of 1 in 100 LT periods) is considered acceptable by P/OM and their marketing colleagues. The economic order quantity has been derived as 2,820 jars. Set up the perpetual inventory system.