Show me the solution in steps. I will not accepted the answer if you didn\'t sho
ID: 378733 • Letter: S
Question
Show me the solution in steps. I will not accepted the answer if you didn't show me your work "IN STEPS!". Thank you.
Problem 4" (1096) The Discrete Corporation orders 5 units of an item every day. Daily demand of this item averages 5 units and is distributed as follows: Demand: 2 345 6 789 Probability: 0.0 004 0.1 0.2 03 0.2 0. 004 0.01 a. If management sets the reorder point at 7 units, what is the service level (SL)? b. Assuming 200 workdays (i.e, annual demand-1,000), how many units of annual demand can't be supplied out of inventory? c. What is the average number of stockouts (stockout units) per order cycle? d. What is total number of stockout units in a year?Explanation / Answer
a) In the probability distribution of demand table, we see that cumulative probability upto 7 units of demand = 0.95
Therefore, with a reorder level of 7 units, service level = 95%
b) Service level is 95% and stockout probability = 1-95% = 5%
Therefore, units of annual demand that can't be supplied out of inventory = 1000*5% = 50 units
c) Order cycle = (5/1000)*200 = 1 day
Average number of stockouts per order cycle = (8-7)*0.04 + (9-7)*0.01 = 0.06 units per day
d) Total number of stockouts in a year = 0.06*200 = 12 units