Question

A cigar company stocks Cuban cigars that have variable lead times because of the difficulty in importing the product. Lead time is normally distributed with an average of 6 weeks and a standard deviation of 2 weeks. Average demand is also normally distributed with a mean of 200 cigars per week and a standard deviation of 25 cigars. 

a. For a 98% service level, what is the ROP? 

b. What is the ROP for a 90% service level? 

c. Explain what these two service level mean. Which is preferable?

Answer 1