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A local company uses an average of 650 items a day. The daily usage has a...

A local company uses an average of 650 items a day. The daily usage has a standard deviation of

23. The manager is willing to accept no more than a 1% chance of a stock out. The lead-time is 14 days. (Assuming the distribution of usage is normal). What is the re-order point?

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Answer #1

Reorder point = lead time demand+ Standard deviation of demand during lead time = lead time*daily demand + z*Standard deviation of demand*sqrt(lead time)

= 14*650+normsinv(0.99)*23*sqrt(14) [ Service level = 99%]

= 9300.201124


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