Central Perk orders their organic coffee filters from a South American supplier
ID: 455448 • Letter: C
Question
Central Perk orders their organic coffee filters from a South American supplier that mails them as inexpensively (hence, as slowly) as possible. Central Perk uses 80 filters a day with a standard deviation of 15 days. It would be disastrous if they ran out of these filters, years ago customers caught them using paper towels from the men's room and business suffered. They have set their service level at 99.5% in hopes of avoiding a similar situation. It takes a fortnight to receive a shipment and the standard deviation of the shipping time is five days. What is their reorder point?
A- 1865
B- 2074
C- 2158
D- 1962
Explanation / Answer
Central Perk orders their organic coffee filters from a South American supplier that mails them as inexpensively (hence, as slowly) as possible. Central Perk uses 80 filters a day with a standard deviation of 15 days. It would be disastrous if they ran out of these filters, years ago customers caught them using paper towels from the men's room and business suffered. They have set their service level at 99.5% in hopes of avoiding a similar situation. It takes a fortnight to receive a shipment and the standard deviation of the shipping time is five days. What is their reorder point?
A- 1865
B- 2074
C- 2158
D- 1962
Answer :
D
Reorder Level = Safety Stock + Lead time consumption
= (Z* S.D.*Square root of of Lead time) +(Lead time * Daily requirement)
=2.576 *15*5* Square root of 15) + (15*80)
= 1962
Value of Z is taken from Z Table.