Question

Find ROP from the following for 95% service level considering Z= 1.65 for 95% service level when daily usage is exactly 50 gallons per day. Lead time is normally distributed with a mean of 10 days and a standard deviation of 2 days.

Answer 1

To find the Reorder Point (ROP) at a 95% service level, we need to consider the lead time demand and the safety stock. The ROP is calculated by adding the lead time demand and the safety stock together.

Step-by-step explanation:

To find the Reorder Point (ROP) at a 95% service level, we need to consider the lead time demand and the safety stock. The lead time demand is calculated by multiplying the daily usage (50 gallons per day) by the mean lead time (10 days) to get 500 gallons.

The safety stock can be calculated by multiplying the Z value (1.65 for a 95% service level) by the standard deviation of the lead time (2 days). Safety stock = Z * standard deviation = 1.65 * 2 = 3.3 days.

To find the ROP, we need to add the lead time demand and the safety stock together. ROP = lead time demand + safety stock = 500 gallons + 3.3 days.

Therefore, the ROP is 500 gallons + 3.3 days.