Question

Your boss wants to set safety stock levels correctly to ensure an 87.9% service level. She needs your answer right away. What should the safety stock level be given that you know: * Average replenishment cycle is 10 days * Standard deviation of daily demand is 12 units * Average daily demand is 100 units * Standard deviation of the replenishment cycle is 3 days Group of answer choices

Answer 1

Answer:

the safety stock is 354

Explanation:

The computation of the safety stock is shown below:

= z × SD of demand during lead time

= z × [ ( SD of daily demand)^2 × Lead time + ( Demand × SDLT)^2]^0.5

= z × [ 144 × 10+ ( 100 × 3)^2]^0.5

= z × [ 1440+90000]^0.5

= 1.17 × 302.39

= 353.79

= 354

hence, the safety stock is 354