Question

7.1 It is reasonable to assume that demand over its replenishment lead time of an item, ISF-086, is nor- mally distributed with x, 20 units and ơ.-4.2 units. a. For a desired service level of P 0.90, compute the required safety factor, safety stock, and reor- der point. b. Repeat for P 0.94, 0.98, and 0.999 c. Prepare a rough sketch of safety stock versus P Is the curve linear? Discuss.

Answer 1

1 Model: Daily demand and its standard deviation are given Service LSafety Stlock 0.9 5.38252 0.94 6.53005 0.98 8.62575 0.999 12.979 3 Data 4 Average daily demand 5 Standard deviation of daily demand,od 6 Lead time da 7 Service level(% of deman 20 4.2 4.2 4.2 4.2 90.00%) 94.00% 98.00%) 99.900% d met) Safety Stock 9 Results 10 Z-value 11 1.55 2.05 3.09 Average demand during lead time 12 Standard deviation of demand during lead time, ơdLT 13 Safety stock 14 Reorder Point 15 16 17 18 19 20 21 4.20 4.20 8.63 12.98 4.20 4.20 6.53 25.38 26.53 5.38 28.63 32.98 8 0.9 0.92 0.94 0.96 0.98 1.02

Model: Daily demand and its standard deviation are 1 Service Lee 0.9 0.94 0.98 0.999 Safety Stock 3 Data 4 Average daily demand 5 Standard deviation of daily demand, Ơd 6 Lead time da 7 Service lev 1% of demand met) 5.38251657528732 6.53004909730678 8.62574542465365 12.9789756859048 4.2 4.2 4.2 0.9 0.94 0.98 0.999 9 Results 10 Z-value NORMSINV(B7) NORMSINV(C7) ENORMSINV(D7) NORMSINV(E B4 B6 1Average demand during lead time 12 Standard deviation of demand during lead time, ơar_B5*SQRT(B6) 13 Safety stock 14 Reorder Point 15 16 17 18 19 20 21 -E4 E6 -C5*SQRT(C6) -D5*SQRT(D6) |-E5*SQRT(E6) -C10 C12 C13+C11 E10 E12 E13+E11 B10 B12 B13+B11 D10 D12 -D13+D11 Safety Stock 14 12 10 24 25

There is positive curvilinear relationship the service level and the safety stock.