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What is the appropriate amount of safety stock

Discussion:

Lead-time demand is 600 pounds. The standard deviation of lead time demand is 52 pounds. Assuming the lead time demand is normally distributed and that an acceptable risk of stocking out is 4%:

a. What is the appropriate amount of safety stock?

b. What reorder point will ensure you can provide a 96% service level?

c. Would the company have to require more or less safety stock if it desires only 2% risk of stock out?

d. What is the effect on your reorder point?

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