Ms
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Ms. Smith is trying to determine the safety stock for one of her best sellers--a high-tech talking doll. The stock out cost per unit for this doll is unknown. From historical data, it is known that demand during lead time (DDLT) for this doll is normally distributed with an average demand during lead time of 40 units and a standard deviation of 10 units. Based on these information and if Ms. Smith would like to maintain a service level of 90% for this doll (Z value from normal curve table for 90% service level is 1.28), the safety stock (units) required is
| a. |
1.28 |
|
| b. |
12.80 |
|
| c. |
51.20 |
|
| d. |
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Answer b: 12.80
Explanation:
| Standard deviation of lead time demand, SdLT | 10.00 | |
| Service level desired | 90.00% | |
| Z value at service level, z | NORMSINV(service probability) | 1.28 |
| Safety stock, SS | z*SdLT | 12.80 |
