Question

Lead-time demand = 630 pounds Standard deviation of lead time demand = 51 pounds (Assume normality.) Acceptable stockout risk during lead time = 4 percent Use Table.

a.What amount of safety stock is appropriate? (Round your answer to the nearest whole number.) Safety stock O units
b.How much of this item should be reordered? (Round your answer to the nearest whole number.) ROP O units
c.What risk of stockout would result from a decision not to have any safety stock? (Omit the "%" sign in your response.) Stockout risk D %

Answer 1

Calculate safety stock by applying z-score corresponding to the desired stockout risk to the standard deviation of lead time demand and find the reorder point based on lead-time demand and safety stock.

Step-by-step explanation:

The question involves determining the amount of safety stock that is appropriate given a certain stockout risk and the reorder point (ROP) based on lead-time demand for inventory management. In this case, you do not need to use any z-table as the standard deviation and lead-time demand are given, and you are dealing with a stockout risk directly, simply convert it into safety stock by multiplying the standard deviation by the z-score corresponding to the desired service level. The safety stock and ROP

calculations are key parts of inventory management in operations management, which is a critical component of business studies.