Question

Weekly demand for cell phones at a Best Buy store is normally distributed, with a mean of 300 and a standard deviation of 200. The supplier takes two weeks to supply a Best Buy order. Best Buy is targeting a CSL of 95 percent and monitors its inventory continuously. How much safety inventory of cell Chopra, Sunil. Supply Chain Management (What's New in Operations Management) (p. 346). Pearson Education. Kindle Edition.

Answer 1

The amount of safety inventory of cell phones best buy should carry is $465.277

Explanation:

Solution

We recall that:

The weekly demand for cell phones= 300 per week

The Standard Deviation = 200 per week

The lead time or number of weeks = 2 weeks (14 days)

Thus,

Z = 95%

= 1.645

Now,

The standard deviation of lead time = Standard deviation√ *√ lead time

Which is

= 200 * √ (2) =2.82.843

So,

The safety inventory = Z * Standard deviation of the lead time

= 1.645 * 2.82.843

$465.277