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Given this information: Lead-time demand = 620 pounds Standard deviation of lead time demand = 50...

Given this information:
Lead-time demand = 620 pounds
Standard deviation of lead time demand = 50 pounds (Assume normality.)
Acceptable stockout risk during lead time = 4 percent
Use Table.


a.

What amount of safety stock is appropriate? (Round your answer to the nearest whole number.)


  Safety stock units


b.

When should this item be reordered? (Round your answer to the nearest whole number.)


  ROP units


c. What risk of stockout would result from a decision not to have any safety stock? (Omit the "%" sign in your response.)


  Stockout risk %
business   Operations-Management   
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Answer #1

safety stock = z x SDLT where z for the service level of 96% would be 1.75

= 1.75 x 50 = 87.5 =88 units.

ROP = demand during lead time + safety stock

= 620+88 = 708

0 safety stock means z=0, which corresponds to the probability of stock out equal to 50%

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