question archive Suppose that usage of cooking oil at Harry's Fish Fry is normally distributed with an average of 15 gallons/day and a standard deviation of two gallons/day
Suppose that usage of cooking oil at Harry's Fish Fry is normally distributed with an average of 15 gallons/day and a standard deviation of two gallons/day
Subject:Operations ManagementPrice:2.87 Bought7
Suppose that usage of cooking oil at Harry's Fish Fry is normally distributed with an average of 15 gallons/day and a standard deviation of two gallons/day. Harry has just fired the manager and taken over operating the restaurant himself. Harry has asked you to help him decide how to reorder cooking oil in order to achieve a service level which is seven times the risk of stockout (therefore the service level is 7/8). Lead time is eight days.
A) If cooking oil can be ordered as needed, what reorder point should be used?
B) If a fixed interval of 30 days is specified, how much safety stock should Harry carry?
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Answer:
A) Safety Stock, ss = Zσ√L, Where Z corresponding to service level 7/8 = 1.15
ss = 1.15*2*8^0.5 = 6.5 gallons
Reorder Point, ROP = µ*L + ss = 15*8+7 = 126.5 gallons
B) Safety stock = Zσ√(L+R) = 1.15*2*(8+30)^0.5 = 14.2 gallons
