Question: Given this information:
Expected demand during lead time = 300 units
Standard deviation of lead time demand = 30 units
Determine each of the following, assuming that lead time demand is distributed normally:
a. The ROP that will provide a risk of stock out of 1 percent during lead time.
b. The safety stock needed to attain a 1 percent risk of stock out during lead time.
c. Would a stock out risk of 2 percent require more or less safety stock than a 1 percent risk? Explain. Would the ROP be larger, smaller, or unaffected if the acceptable risk were 2 percent instead of 1 percent? Explain.