Solve using ExcelQM H & K Electronic Warehouse sells a 12-pack of AAA batteries,
ID: 399115 • Letter: S
Question
Solve using ExcelQM
H & K Electronic Warehouse sells a 12-pack of AAA batteries, and this is a very popular item. Demand for this is normally distributed, with an average of 50 packs per day and a standard deviation of 16. The average delivery time is five days, with a standard deviation of two days. Delivery time has been found to be normally distributed. A 96% service level is desired.
(a) What is the standard deviation of demand during the lead time?
(b) How much safety stock should be carried, and what should be the reorder point?
Explanation / Answer
1. Standard deviation of demand, SD1 = 16 packs per day
Lead Time, L = 5 days
Standard deviation of demand during lead time, SD2 = (L)^1/2 * SD1 = (5)^1/2 * 16
= 2.23*16 = 35.77 or 36 packs per day
2. For 96% service level, Z value = 2.054
Average demand, D = 50 packs per day
Safety stock = D*Z-value
= 50*2.054
= 102.7 or 103 packs
Reorder point = Safety stock + Average demand
= 103 + 50 = 153 packs