Question

Same problem statement: Weekly demand for DVD-Rs at a retailer is normally distributed with a mean of 1,000 boxes and a standard deviation of 150. Currently, the store places orders to the supplier, with a reorder point of 4,200 boxes. The order quantity to the supplier is fixed at 5,000 boxes. Replenishment lead time is 4 weeks, fixed order cost per order is $100, each box costs the retailer $10, and the inventory holding cost is 25% per year. If the retailer wants to achieve a 99% service level (use the z-value with one decimal, as in Table 13.4 on page 400 of the textbook), what should be the safety stock value? Numeric Response

Answer 1

Answer: 690

Explanation:

demand per week, d		1000
Lead time, LT		4
standard deviation of weekly demand, Sd		150
standard deviation of lead time, SLT		0
Standard deviation of demand lead time, SdLT	SQRT((LT*(Sd)^2) + (d*SLT)^2))	300
Service level desired		99%
Z value at service level, z	from table	2.3
Safety stock, SS	z*SdLT	690