SOLVED

27) Demand for a product is approximately normal, averaging 5 units per day with a standard deviation of 1 unit per day. Lead time for this product is approximately normal, averaging 10 days with a standard deviation of 3 days. What reorder point provides a service level of 90 percent? 28) A product has a reorder point of 260 units, and is ordered ten times a year on average. The following table shows the historical distribution of demand values observed during lead time. Demand Probability 240 .1 250 .2 260 .4 270 .2 280 .1 Currently, stockouts are valued at $5 per unit per occurrence, while inventory carrying costs are $2 per unit per year. Should the firm add safety stock? If so, how much safety stock should be added? 29) 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?