Question

1. Use the information in the following table to answer the questions below:

Demand	100 units per week
Standard deviation of weekly demand	10 units
Average lead time	10 days
Standard deviation of the lead time	5 days
Cycle service level	70 %

Considering a continuous review system,

1. 1. Find the standard deviation of demand during the lead time.
   2. Find the safety stock.
2. 3. What is the reorder point?

Answer 1

	demand per week		100.00
	Lead time, LT		10.0
	Order quantity, Q=	√(2*S*D/H)	141
	standard deviation of weekly demand, Sd		10.0
	standard deviation of lead time, SLT		5.00
Answer a.	Standard deviation of lead time demand, SdLT	SQRT((LT*(Sd)^2) + (d*SLT)^2))	501.00
	Service level desired		70.0%
	Z value at service level, z	NORMSINV(service probability)	0.52
Answer b	Safety stock, SS	z*SdLT	263
	Lead Time Demand	( LT * daily Demand)	1000
Answer c	Reorder point	Lead time demand+Safety stock	1263