ANSWER::
a)
Reorder point = Average demand during lead time+safety stock
or, 950 = 3*250 +safety stock
or, safety stock = 200 (Ans)
safety stock = z*standard deviation of daily demand *sqrt(lead
time) = z*80*sqrt(3)
or, z = 200/(80*sqrt(3))
= 1.443375673
CSL = NORM.S.DIST(1.443375673,TRUE)
= 0.925542663
= 92.5542663%
b)
If lead time is also variable then standard deviation of daily demand during lead time = sqrt(lead time*standard deviation of daily demand^2+daily demand^2* standard deviation of lead time^2) = sqrt(3*80^2+250^2*2^2)
= 518.8448708
Safety stock = z*standard deviation of daily demand during lead time = normsinv(0.97)*518.8448708
= 975.8401166
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