a gas company experiences variation in both demand for parts an in lead time in ordering...
a gas company experiences variation in both demand for parts an in lead time in ordering them, the supply office notices normally distributed daily demand rate with a mean of 43 parts, and a standard deviation of 5.2. the replenishment lead time is normally distributed with a mean of 9 days and standard deviation of 4 days.
A) if the daily demand and the lead time are independent, what reorder point should be established to provided a 95% level per order cycle?
Homework Answers
Demand (d) = 43
standard deviation (s) = 5.2
Lead time (LT) = 9
standard deviation of lead time (ss) = 4
Service level is 95%. z value for 95% service level is 1.64
Reorder point = d*LT + z*sqrt(LT*(s)^2 + (d)^2*(ss)^2) = 43*9 + 1.64*sqrt(9*(5.2)^2 + (43)^2*(4)^2) = 670.2
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