Problem 13-20 Given this information: Lead-time demand = 570 pounds Standard dev

Question

Problem 13-20 Given this information: Lead-time demand = 570 pounds Standard deviation of lead time demand 39 pounds (Assume normality.) Acceptable stockout risk during lead time 5 percent Use Table. a. What amount of safety stock is appropriate? (Round your answer to the nearest whole number) Safety stock units b. How much of this item should be reordered? (Round your answer to the nearest whole number) ROP c. what risk of stockout would result from a decision not to have any safety stock? (Omit the "%" sign in your response.) stockout risk 1% units

Explanation / Answer

Lead time demand = 570 pounds

Standard deviation of lead time demand = 39 pounds

Acceptable stock out risk = 5%.so service level = 100%-5% = 95%

At 95% service level value of Z = 1.65

a) Safety stock = Z x standard deviation of lead time demand

= 1.65 x 39

= 64.35 or rounded to 64 units

b) Reorder point = Lead time demand + Safety stock

= 570 + 64

= 634 units

C) If there is no safety stock, the value of Z = 0. So for Z value of 0 service level = 50%

So stock out risk = 100% - 50% = 50%

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---