Exercise 9 week 12 OMG 322 M W

Safety (buffer) stock-Service level

A wholesalers computer records show the following information for one of the items in its inventory:

Mean Monthly Demand equals 9,000

Standard deviation of demand was 800 for a two-month time period

Replenishment lead time was 2 months

If the desired service level is 98 %, then what is the statistical safety stock? What is the reorder point? Would the nature of the product, bulky or compact, need to be included in your final decision?

Demand = 9,000 Standard deviation= 800 Service level = 98%, Which gives a Z value of 2.06

Safety stock = 2.06 * 800 = 1,648

Reorder point = 9,000*2 + 1,648 = 19,648

No, the nature of the product would be