6.4.2.3 Reorder Level - Variable Demand and Lead Time In the previous sections, we considered the variability of either demand or the lead time. In this section, we consider the case where both demand and lead times are variable. Assuming that the demand and lead times are normally distributed, the reorder level, s, is given by s=dL+V (67)2 + (09) (6.9) h39 where d is the average demand per period; . Od is the standard deviation of demand per period; . L is the average replenishment lead time; . is the standard deviation of lead time. The term/(c)2 + (o dis the standard deviation of demand during lead time and the term :/ (02)2 + (of)represents the safety stock, Solved Problem 6.10 The daily demand experienced by small home computer assembler is normally distributed with a mean of 20 units and a standard deviation of 6 units. The assembler sources the RAM for the computer from a supplier in the local market. The lead time for supply of the RAM chips is also normally distributed with a mean of 3 days and a standard deviation of 1 day. If the assembler desires to ensure a 90% probability of not stocking out during lead time, compute the following: Reorder level, s Safety stock, SS