Determining Safety Stock
After keeping track of demand during each 7 day lead time cycle, the average daily demand was found to be normally distributed with a mean of 100 and a standard deviation during lead time of 50. The company desires to have a customer service level of 95% during the lead time periods that occur during the year.
a. What would be the reorder point for the company?
b. Based on this reorder point, how much of the stock would be safety stock?