Question

Caring Hospital’s dispensary reorders doses of a drug when the supply on hand falls to 18 units. Lead time for resupply is three days. Given the typical usage over the last 10 days, what service level is achieved with the hospital’s reorder policy?

Answer 1

Answer:

97.26%

Explanation:

Note: The complete question is attached as picture below

Reorder point = 18 units

Total demand = 46 units (Total number of the units)

Lead Time = 3 days

Annual demand = Total demand / Total days

Annual demand = 46 units / 10 days

Annual demand = 4.6 units

Standard deviation of demand = √∑(x - X)²/n-1

Standard deviation of demand = √14.40/10-1

Standard deviation of demand = √1.6

Standard deviation of demand = 1.265

Now, we determine the service level.

ROP = Annual Demand (LT) + z(σd)√LT

18 = (4.6*3) + (z*1.265*√3)

18 = 13.8 + 2.19z

z = 1.92

So, we calculate the corresponding Service level in Excel using the NORMSDIST function as shown below

Service level = NORMSDIST(1.92)

Service level = 0.9726

Service level = 97.26%