Question

The paper usage at a small copy center is normally distributed with a mean of 5 boxes of paper per week, and a standard deviation of 0.5 boxes. It takes 2 weeks for an order of paper to be filled by its supplier. What is the safety stock to maintain a 99% service level?

Answer 1

1.649 approximately 2

Explanation:

S.d = standard deviation = 0.5

Time taken = lead time = 2 weeks

Mean = demand for week = 5 boxes

We are required to find the safety stock to maintain at 99% service level.

At 99% level, the Z value is equal to 2.326.

Therefore,

Safety stock = z × s.d × √Lt

= 2.326 × 0.5 x √2

= 1.649

Which is approximately 2.