A product’s usage is normally distributed with an average demand during lead tim

Question

A product’s usage is normally distributed with an average demand during lead time of 8,000 units and a standard deviation of 250. Currently, the reorder point for this product is 8,200. If the company would like to have a service level of 95% for this product then

A) it must decrease its safety stock by approximately 412 units.

B) it must decrease its safety stock by approximately 212 units.

C) it must increase its safety stock by approximately 412 units.

D) it must increase its safety stock by approximately 212 units

Explanation / Answer

D) it must increase its safety stock by approximately 212 units

To be derived from the formula:

Re-order point = Average Lead Time*Average Demand + Service Level*?Avg. Lead Time*Standard Deviation of Demand2 + Avg. Demand2*Standard Deviation of Lead Time2

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.