Question: Example 3 : Safety stock continuous review system ( Q ) This year Amazon offers a new product during the holiday season, natural Christmas trees.

Example

3

: Safety stock continuous review system

(

)

This year Amazon offers a new product during the holiday season, natural Christmas trees. In order to avoid stockouts for this new product, Amazon has to carefully plan its safety stock. Based on a market survey, Amazon forecasts a weekly demand of

3700

trees, with a standard deviation of

600

trees. All trees will be shipped to customers from Amazon's distribution center in Kentucky. The lead time to receive the trees from the tree farm located in West Virginia is

2

weeks. Since this is a new product offering, Amazon wants to guarantee a service level of

98 % .

.

What is the safety stock Amazon has to keep in order to ensure this service level?

.

What is the reorder point for the Christmas trees?

Example 3: Safety stock continuous review system (Q) This year Amazon

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