The annual demand for a product is 16,400 units. The weekly demand is 315 units with a standard deviation of 90 units. The cost to place an order is $31.00, and the time from ordering to receipt is four weeks. The annual inventory carrying cost is $0.20 per unit.
a. Find the reorder point necessary to provide a 95 percent service probability. (Use Excel's NORMSINV() function to find the correct critical value for the given α-level. Round "z" value to 2 decimal places.)
Reorder point
b. Suppose the production manager is asked to reduce the safety stock of this item by 55 percent. If she does so, what will the new service probability be? (Use Excel's NORMSDIST() function to find the correct probability for your computed Z-value. Round "z" value to 2 decimal places and final answer to 1 decimal place.)
Service probability %