Demand for a Product Is Relatively Constant at Five Units

question 5

Essay

Demand for a product is relatively constant at five units per day.Lead time for this product is normally distributed with a mean of ten days and a standard deviation of three days.
(a)What reorder point provides a 50 percent service level?
(b)What reorder point provides a 90 percent service level?
(c)If the lead time standard deviation can be reduced from 3 days to 1,what reorder point now provides 90 percent service? How much is safety stock reduced by this change?

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Definitions:

Mean

The arithmetic average of a set of values, calculated by dividing the sum of all values by the number of values.

Scores

Numerical values that represent the result of an evaluation or measurement.

Z Score

A statistical measure that describes a value's relationship to the mean of a group of values, expressed in units of standard deviation.

Standard Deviation

A measure of the amount of variation or dispersion in a set of values, indicating how much individual data points deviate from the mean.