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17. (15 polnts) The daily demand for sunscreen at a drugstore is normally distributed with a mean of 18 bottles and a standard deviation of 4. They use a continuous review policy, where supplier lead time is a constant 5 days a Find the average and standard deviation of the demand over the lead time. Average Lead Time Demand (round to an integer) 94 SL Dev. of Lead Time Demand (round to b deinal plae). The store currently uses a safety stock of 10 bottles. What CSL does it achieve? b. Ba GL% CSL for Current Policy(in %form with Di lfthe store wants to achieve aCSL of985%, whatreorder point should Ruse? decimal places)- c. I 09 ROP for 985% CSL (round to an integer- d. Suppose that the lead time is not constant, but instead has a standard deviation of 3days. For adSL of 98.5%, what re-order point should the store use now? Average Lead Time Demand (round to an Inteper). g0 Dev, of Lead Tine Demand (round to decinal places). The store currently uses a safety stock of 10 bottles. What CSL does it achieve? with decimalplaces) CSL for Current Policy (in % c. If the store wants to achieve a CSL of 98.5% what re-order point should it use? 109 ROP for 985%CSL (round to an integer- Suppose that the lead time is not constant but instead has a standard devtation of 3days. ForaCS1 of98.5%, what re order point should the store us, now? d

Answer 1

17.

A.

Demand per day = 18

Lead time = 5 days

so, lead time demand =Demand per day*Lead time= 18*5 = 90

S.D. of lead time demand = (Lead time)^.5 * SD = 5^.5 * 4

S.D. of lead time demand = 8.94

B

Safety stock = Z*SD of lead time

10 = Z* 8.94

Z = 10/8.94 = 1.12

At this value of Z, CSL = 86.86% ( from normal distribution Z table)

C.

At 98.5%, Z score = 2.17

Now,

Reorder point = lead time demand + Z*SD of lead time = 90+ 2.17*8.94 = 109.4 or 109

D.

Reorder point = 90 + Z*((4^2 * 5) + (3^2 * 18^2))^.5

Reorder point = 90 + 2.17*((4^2 * 5) + (3^2 * 18^2))^.5

Reorder point = 208.8 or 209 unit