Question: A company uses a continuous-review system, with optimal order quantity of 100 units. Annual demand for an item is normally distributed with a mean 100

A company uses a continuous-review system, with

A company uses a continuous-review system, with optimal order quantity of 100 units. Annual demand for an item is normally distributed with a mean 100 and standard deviation 200. The reorder lead time is 0.5 month. It is desirable to set a service level such that there is an average of not more than one stockout a year. Page 13 1 (a) What should be the level of safety stock? (b) What is the average waiting time for a customer? Do you think that the average waiting time is reasonable compared to the reorder lead time? (c) What should the safety stock be if it is desirable to set a service level to meet at least 90% of the units demanded during a typical lead time? (d) If the reorder lead time is normally distributed with a mean 0.5 and standard deviation 0.25, how do the results in part (a) and (b) change, assuming that lead time demand is again normally distributed

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