This type of problem can be recognized when the demand rate (d), lead time (LT), and desired service level or stockout risk are given. Use these steps to solve this type of problem:

1. Match the choice of formula to the standard deviation(s) that are given in the problem (e.g., if both demand and lead time standard deviations are given, use Formula 12–15 for the ROP).

2. If the problem asks for the amount of safety stock, use the second part of the appropriate ROP formula.

3. If the “expected demand during lead time” and the “standard deviation of lead time demand” are given, use Formula 12–12.

ROP for variable demand and constant lead time. The housekeeping department of a motel uses approximately 400 bars of soap per day. The actual number tends to vary with the number of guests on any given night. Usage can be approximated by a normal distribution that has a mean of 400 and a standard deviation of 9 bars per day. A supply company delivers soap bars with a lead time of three days. If the motel policy is to maintain a stockout risk of 2 percent, what is the minimum number of bars of soap that must be on hand at reorder time, and how much of that amount can be considered safety stock?