An automobile service station uses 900 cases of motor oil annually. The station operates 300 days a year. The order replenishment lead time for motor oil is 4 days and the daily demand has a standard deviation of 4 cases per day. The station has specified service level of 97%.
a) What is the level of safety stock required assuming that demand during lead time is normally distributed?
b) If the station decides to hold only 6 cases of motor oil as safety stock what is the stock out risk?