Problem 11

The z-values for 90% service level, 95% service level, and 99% service level are 1.282, 1.645, and 2.326. Using the data from the Safety Stock Example Exercise:

a. Prepare a table showing the safety stock holding costs for each service level.

Update your table to reflect:

b. Cutting the average lead time in half.

c. Cutting the lead time standard deviation in half.

d. Cutting the daily demand standard deviation in half.

e. All three reductions simultaneously.

Write a one page summary addressing the effect of service level on cost and the sensitivity of cost to changes in the parameters.

	Average	Std Dev				90%	95%	99%
Daily Demand	12.3	6.4			a.	80.05	102.71	145.23
Lead Time	3.1	2.2			b.	77.03	98.84	139.76
					c.	48.08	61.70	87.24
Lead Time Demand	38.13	29.31245			d.	75.48	96.85	136.94
Safety Stock		48.21898			e.	38.51	49.42	69.88
SS Holding Cost		102.71
	Average	Std Dev
Daily Demand	12.3	6.4
Lead Time	1.55	2.2
Lead Time Demand	19.065	28.20871
Safety Stock		46.40334
SS Holding Cost		98.84
	Average	Std Dev
Daily Demand	12.3	6.4
Lead Time	3.1	1.1
Lead Time Demand	38.13	17.60786
Safety Stock		28.96494
SS Holding Cost		61.70
	Average	Std Dev
Daily Demand	12.3	3.2
Lead Time	3.1	2.2
Lead Time Demand	38.13	27.64033
Safety Stock		45.46834
SS Holding Cost		96.85
	Average	Std Dev
Daily Demand	12.3	3.2
Lead Time	1.55	1.1
Lead Time Demand	19.065	14.10436
Safety Stock		23.20167
SS Holding Cost		49.42

What are the key take aways from the calculations (the sensitivity analysis)? few short paragraphs.