A retailer buys a certain item from a distant supplier. Lead time (L) is normally distributed with a mean of thirty days (μ = 30) and a standard deviation of fourteen days (σ = 14). Daily demand is also normally distributed with a mean of four items (μ=4) and a standard deviation of one and one-half items (σ=1.5).
Requirement:
A. Determine the safety stock and reorder point for an eighty-five percent (85%) service level, that is, a 15% risk of a stockout.
B. Determine the safety stock, and reorder point for a ninety-five percent (95%) service level, that is, a 5% risk of a stockout.