Question

Assume that the Best Buy store in Exercise 3 has a policy of ordering cell phones from the supplier in lots of 500. Weekly demand for cell phones at the store is normally distributed, with a mean of 300 and a standard deviation of 200. The supplier takes two weeks to supply an order. If the store manager is using a continuous review policy and targeting a fill rate of 99 percent, what safety inventory should the store carry

Answer 1

Safety Stock = 932

Step-by-step explanation:

The safety stock is determinate as follows:

f the desired service level is 99% When inventory reaches ROP, during the lead time 99% of the customers will receive the good while 1% of them will face stock-out.

Formula:

`Pz * √(lead-time) * \sigma =\\P(99) * √(2) * 200 =`

We have 2 weeks lead-time the standard deviation is 200 while we want a service level of 99% (z= 0.99)

2.33 x √2 x 200 = 932

Safety Stock = 932