Question

In a reorder point problem where both demand and lead time are variable, demand averages 200 units per day with a daily variance of 64, and lead time averages 6 days with a standard deviation of 1 day. What should the reorder point be for a 95% service level?

Answer 1

~ 1561.235

Step-by-step explanation:

Given :

`Z=1.645`

`d = 200\ \\variance =64`

Standard deviation can be determined by the
`√(variance )`

Standard deviation=SD

=
`√(64)\ =\ 8`

`LT = 6\`

σ = 8

Now using the formula

`R\ =\ d \ *\ LT\ +Z\ \sqrt{LT^(2)\ +SD^(2) \ +\ d\ \sigma\ ^(2) } \\\\Putting\ the\ respective\ value\ we\ get \\R=200 * 6 + 1.645√(6 * 8^2 + 200 *1^2)`

R=1561.235

~ 1561.235