Asked by Maritza Cabrera on May 09, 2024
If daily demand is normally distributed with a mean of 15 and standard deviation of 5, and lead time is constant at 4 days, 90% service level will require safety stock of approximately
A) 7 units.
B) 10 units.
C) 13 units.
D) 16 units.
E) 26 units.
Safety Stock
Inventory kept on hand as a buffer against variability in demand or supply, to avoid out-of-stock situations.
Standard Deviation
A measure of the dispersion or spread of data points in a data set, indicating how much variation there is from the average.
Service Level
A measure of the quality of service provided by a business, often evaluated against customer expectations or industry standards.
- Determine and explain the quantities of safety stock in response to diverse demand and lead time conditions.
- Comprehend the significance of service level within inventory management and its impact on decisions regarding stock.
Learning Objectives
- Determine and explain the quantities of safety stock in response to diverse demand and lead time conditions.
- Comprehend the significance of service level within inventory management and its impact on decisions regarding stock.