Note: ?0.95 = 1.64.
Note: ?0.98 = 2.05
Table 1. Details of demand over the past 4 months
Month |
Demand |
1 |
9070 |
2 |
8775 |
3 |
9865 |
4 |
9250 |
Table 2. Details of actual demand and demand forecast over the past 4 months
Month |
Demand |
Forecast |
1 |
9070 |
9030 |
2 |
8775 |
8851 |
3 |
9865 |
9926 |
4 |
9250 |
9310 |
1.
A.
Safety stock = Z*Standard deviation*(Lead time)^.5
Z at 95% = 1.64
Safety stock = 1.64*100*3^.5
Safety stock = 284.06 or 284 units
B.
Reorder point = daily demand*lead time + safety stock
Reorder point = 450*3 + 284
Reorder point = 1634 units
----
2.
When service level is 98%
A.
Safety stock = Z*Standard deviation*(Lead time)^.5
Z at 98% = 2.05
Safety stock = 2.05*100*3^.5
Safety stock = 355.07 or 355 units
B.
Reorder point = daily demand*lead time + safety stock
Reorder point = 450*3 + 355
Reorder point = 1705 units
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