Question

Management wants to change the safety stock of dehydrated water to be 1.75 pounds. This item has a standard deviation during the lead time of 1.5 pounds with an average of 59.9 pounds maintained in inventory.

Calculate the percentage of time that you expect to run out of dehydrated water. (Keep two decimal places in your answer that represents percentage)

Answer 1

Solution:

Given that Safety Stock, = 1.75, Lead time, = 1 and Standard deviation, = 1.5

We know that

1.75 =

= 1.1667

By using normsdist(1.1667) we get  percentage of time that you expect not to run out of dehydrated water

percentage of time that you expect not to run out of dehydrated water = 0.8783 = 87.83%

percentage of time that you expect to run out of dehydrated water = 1- percentage of time that you expect not to run out of dehydrated water = 1-0.8783 = 0.1217 =12.17%