The average daily demand for laptops at Best Buy is 20, with a std. deviation of...

Question

Question

The average

daily demand

for laptops at Best Buy is 20, with a std. deviation of 5 units.

The lead time is constant at 2 days. Find the reorder point if management wants a 90% service

level (i.e., risk stockouts only 10% of the time). How much is the safety stock?

Answer 1

Answer #1

Safety Stock = Z * standard deviation * sqrt(lead time)

Z = 1.28 (for 10% stockout risk)

Safety stock = 1.28 * 5 * sqrt(2) = 9.051

ROP = Daily demand * Lead time + Safety stock

= 20 * 2 + 9.051

= 49.051

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Answer 2

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