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An item is being managed using a fixed time period model with safety stock. Assume weekly demand = 75, the review cycle = 3 w
Daily demand for a product is 22 units with a standard deviation of 6 units. The review period is 35 days and the leadtime is
The demand for a product is 250 units per month on average. If the standard deviation of demand is 19, what safety stock woul
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Answer #1

Weekly Demand d = 75

Review Cycle T = 3 weeks

Safety Stock = 32 units

Working weeks = 50

Annual Demand D = 75*50 = 3750

Average Inventory I = d*T/2 + Safety Stock

I = 75*3/2 + 32

I = 144.50

Inventory Turns = D/I = 3750/144.50

Inventory Turns = 25.95

Inventory Turns = 26

____________________________________________________________________________

Daily Demand d = 22

Sd of Demand = 6

Review Period P = 35

Lead Time L = 14

On Hand Inventory I = 195

Service Level = 98.214%

Z = NORM.S.INV(98.214%) = 2.10

Order Quantity Q = d*(P+L) + Z*SD of Demand*(P+L)^(1/2) - I

Q = 22*(35+14) + 2.10*6*(35+14)^(1/2) - 195

Q = 22*49 + 2.10*6*7 - 195

Q = 971.2

Q = 971

_________________________________________________________________________________

Sd of Demand = 19

Service Level = 90.32%

Z = NORM.S.INV(90.32%) = 1.30

Safety Stock = Z* SD of Demand

Safety Stock = 1.30*19

Safety Stock = 24.70

Safety Stock = 25 units

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