Question: One item a computer store sells is supplied by a vendor who handles only that item. Demand for that item recently changed, and the store

One item a computer store sells is supplied by a vendor who handles only that item. Demand for that item recently changed, and the store manager must determine when to replenish it. The manager wants a probability of at least 96 percent of not having a stockout during lead time. The manager expects demand to average a dozen units a day and have a standard deviation of two units a day. Lead time is variable, averaging four days with a standard deviation of one day.

What is the right formula to calculate safety stock in this problem?

What is the corresponding safety stock level to achieve this stockout rate?

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