Answer:
a) safety stock is 2611 yards
b) Reorder point is 30611 yards
c) Z = 0.8962 or 89.62%
Explanation:
Given that;
jeans is normally distributed with an average of 4000 yards.
standard deviation is 600 yards
the company wants to limit the probability of a stock out and work stoppage to 5%
so ∝ = 1 - 5% = ( 1 - 5/100) = 0.95
from table; z value = 1.645
lead time = 7 days
now;
a) safety stock
safety stock is determined using the following;
⇒ Z-score × standard × √lead time
so we substitute
safety stock = 1.645 × 600 × √7
= 2611.3565 ≈ 2611 yards
b) reorder point
reorder point is determined using the following;
⇒ demand × lead time + safety stock
we substitute
reorder point = (4000 × 7) + 2611
reorder point = 30611 yards
c) level of service would a safety stock of 2000 yards provide
safety stock = Z√lead time × standard deviation
we substitute
2000 = Z × √7 × 600
Z = 2000 / ( 600 × √7 )
Z = 1.25988 ≈ 1.26
FROM table; Z = 0.8962 or 89.62%
