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Questiull 4 10 Punis) Currently our companys inventory accuracy has been 90% but customers have been complaining. We usuallyCurrently our company’s inventory accuracy has been 90% but customers have been complaining. We usually have 25 stockouts per year. In reviewing our annual demand, it was 250 000 units and ordered quantities being 2500. Daily demand for a product is normally distributed with a mean of 150 units and a mean absolute deviation of 15 units. The firm currently uses a reorder point system and the lead time for this analysis is 6 days. Image result for safety stock factor table a. What is the service level and the company’s safety stock? b. What is the reorder point? c. What would be the service level if stockouts were reduced by 15 units? Question 4 options:

business   Operations-Management   
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Answer #1

Number of orders = demand / order size = 250000/2500 =100

stockout percentage = 25/100 =0.25

which means the service level is 1-0.25 =0.75

safety stock = z x SD x ( lead time)^0.5

= 0.67x15x(6)^0.5 = 24.61 =25

ROP = demand during lead time + Safety stock = 6x150+25 = 925

If stockouts are reduced to 15. he service level =(1- 15/100 ) =0.85

  

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