Question

Assume that the daily demand, at one of the retailer, for Keurig beverage brewing system is normally distributed and that the average daily demand is 20 machine with a standard deviation of 3 machine per day. The lead time for receiving a new order of a Keurig system constant at 9 days. Determine the safety stock if the retailer wants a stock-out risk equal to 6%.

Safety Stock=___________?

Answer 1

Solution :

P(Z > 1.555) = 0.06

Using z-score formula,

x = z * $\sigma$ + $\mu$

x = 1.555 * 9 + 20 = 30.995 = 34

Safety stock = 34