Question

(7 points)

Answer 1

SOLUTION AND EXPLANANTION:

Let us define :Protection period” = P = Reorder period + Lead time = 7 + 3 days = 10 days

Z value for service level of 99% as per Z table= 2.33

Demand during protection period = = D = 80

Standard deviation of demand during Protection period = Sd = 10

Safety stock during protection period =$Zxalue * Sd * Square root ( P )$

$2.33 * 10 * \text { square root }(10)$$23.3 \times 3.162=73.67$

Therefore,

Gross quantity to be ordered = Demand during protection period + Safety stock during protection period = 80 +73.67 = 153.67

However, number of items already in hand = 30 units

Hence,

Net quantity to be ordered = Gross quantity to be ordered – Number of items already in hand = 153.67 – 30 = 123.67 ( 124 rounded to nearest whole number)