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A company replenishes its inventory using a periodic review system, with estimates for the varying rate...

A company replenishes its inventory using a periodic review system, with estimates for the varying rate of demand and lead times for calculating the order quantities. What is the predicted in-stock rate if the company uses the service factor z=1.1 in its calculations? Round your answer to the nearest percentage.

A) 88%

B) 90%

C) 84%

D) 86%

business   Operations-Management   
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Answer #1

The correct option is (d),i.e., 86%

Rationale: The in-stock rate which is also called the probability of not running out of stock is calculated using z- table or sometimes we also use the service level -service factor table (the answer obtained from both the tables is same). Calculate the probability at z = 1.1 using normal distribution z-table and find the probability at z = 1.1 which is 0.86433, so the in-stock rate becomes 86.433% , or 86% when rounded off.

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