Lean Supply Chain Management Essentials

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Appendix 1: e Myth of the Bell-Shaped

Curve: Inventory Level and Customer Service

We start with the general assumptions of finished goods inventory:

1. e more intermittent the demand, the higher the inventory level will need to

be to provide a certain level of customer service.

2. We can accurately measure the variation of any item using a standard devia-

tion calculation.

3. ere is a diminishing return to higher levels of standard deviations, but in

general, if I keep more inventory, I will achieve higher service.

is set of assumptions is based on the classic bell-shaped curve representing normal

distribution: In this example, we ha