SOLVED

22) Daily demand for a product is normally distributed with a mean of 150 units and a standard deviation of 15 units. The firm currently uses a reorder point system, and it seeks a 75% service level during the lead time of 6 days. a. What safety stock is appropriate for the firm? b. What is the reorder point? 23) Daily demand for a product is normally distributed with a mean of 200 units and a standard deviation of 20 units. The firm currently uses a reorder point system, with a lead time of 4 days. a. What safety stock provides a 50% service level? b. What safety stock provides a 90% service level? c. What safety stock provides a 99% service level? 24) Average daily demand for a product is normally distributed with a mean of 5 units and a standard deviation of 1 unit. Lead time is fixed at four days. (a) What is the reorder point if there is no safety stock? (b) What is the reorder point if the service level is 80 percent? (c) How much more safety stock is required if the service level is raised from 80 percent to 90 percent? 25) Average daily demand for a product is normally distributed with a mean of 20 units and a standard deviation of 3 units. Lead time is fixed at 25 days. What reorder point provides for a service level of 95 percent? 26) A product has a reorder point of 110 units, and is ordered four times a year on average. The following table shows the historical distribution of demand values observed during lead time. Demand Probability 100 .3 110 .4 120 .2 130 .1 Managers have noted that stockouts occur 30 percent of the time with this policy, and they question whether a change in inventory policy, to include some safety stock, might be an improvement. The managers realize that any safety stock would increase the service level, but they are worried about the increased costs of carrying the safety stock. Currently, stockouts are valued at $20 per unit per occurrence, while inventory carrying costs are $10 per unit per year. What is your advice? Do higher levels of safety stock add to total costs, or not? What level of safety stock is best?