Demand during leadtime for CD-ROM drives averages 80units ( normally distributed), with a standard deviation of...
Demand during leadtime for CD-ROM drives averages 80units ( normally distributed), with a standard deviation of 8 drives. Mr. Smith, the purchasing manager, is willing to accept a stockout risk of no more than 3 percent. What is the appropriate reorder point ( Z = 1.88)?
Homework Answers
Given data:
Mean Demand (µ) = 80 units
Standard Deviation (σ) = 8
Maximum Stockout risk = 3 %
Z = 1.88
Safety stock = x - µ
Safety stock = z * σ = 1.88 * 8 = 15.04
Reorder point = Expected demand during lead time + Safety stock = Mean demand + Safety stock = 80 + 15.04 = 95.04
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