The correct answer is Option C : 13 Units. The closest whole number to the calculated safety stock is 13 units.
To find safety stock with a 90% service level and given data, calculate using the formula
Safety Stock = Z * standard deviation * sqrt(lead time).
To calculate the safety stock at a 90% service level given that daily demand is normally distributed with a mean of 15 and standard deviation of 5, and the lead time is constant at 4 days, we use the following formula :
- Determine the Z-score that corresponds to the desired service level.
- Calculate the safety stock using the formula : Safety Stock = Z * standard deviation * sqrt(lead time).
For a 90% service level, the Z-score is approximately 1.28. Using the formula, we get :
Safety Stock = 1.28 * 5 * sqrt(4) = 1.28 * 5 * 2 = 12.8
Since safety stock can't be a fraction of a unit, we'd round to the nearest whole number. Hence, the required safety stock is approximately 13 units.