The Operations Manager at a Chemical Company That Produces Insecticide

question 36

Essay

The operations manager at a chemical company that produces insecticide for use in commercial applications is attempting to set a safety stock level for a key ingredient that is used in their most powerful product.She believes that demand during lead time for this ingredient is normally distributed based on past data.In addition, she believes that future use is accurately depicted by these historical demand-during-lead-time data (in gallons): 55, 75, 75, 70, 80, 60, 50, 70, 60, and 85.She estimates the standard deviation of demand during the lead time to be 8.5 gallons.
a.What is the average demand during the lead time for this key ingredient?
b.What is the safety stock they need to provide a 95% service level?
c.What is the order point the company should use?

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Definitions:

Daily Values

Nutritional reference amounts labeled on food packages to help consumers see how a food fits into their daily meal plan.

Caloric Intake

The total number of calories consumed through food and beverages over a period of time, critical in managing weight and energy levels.

Iron Requirements

The amount of iron an individual needs to consume to maintain healthy blood levels and support bodily functions.

Athletes

Individuals who are highly skilled in physical activities or sports, often participating in competitions.