John's inventory formula

[Jim Clauson <clauson@deming.ces.clemson.edu>]

John McConnell has tried twice to get his Australian e-mail to talk to our US e-mail and translate
the symbols correctly - but to no avail.

So - in narrative form:

Inventory target equals Average demand plus 3 sigma sales plus 3 sigma manufacturing variance

In a former life I was in production and inventory control and had numerous "statistical" methods for
calculating safety stock.  You know - all that stock that gets dirty, rusty, broken that we have to
store to guard against uncontrollable variation...  In those days, we had no clue about variation
reduction - what we has was huge warehouses and low interest rates.

So - looking at John's "current reality formula" above...  one starts with the average sales demand, 
then adds 3 sigma worth of sales "just in case" and then one adds 3 sigma manufacturing variance
"just in case" -- and no matter what happens, we are covered, right??  

How would they know?

Jim Clauson
Occasionally humble moderator