The demand during the lead-time is normally distributed with a mean of 40 and a standard deviation of 4.If the company wishes to maintain a 90 percent service level,how much safety stock should be held?
A)45.12
B)41.28
C)1.28
D)5.12
E)None of the above

Question

Quizplus · Accepted Answer

To determine the safety stock, we need to use the formula:
Safety Stock = Z-value x Standard Deviation x Square root of Lead Time

Z-value for 90% service level is 1.28 (from standard normal distribution table), and the lead time is not given. Let's assume the lead time is one period.

Then, Safety Stock = 1.28 x 4 x sqrt(1) = 5.12

Therefore, the company should hold 5.12 units of safety stock to maintain a 90% service level.

The Demand During the Lead-Time Is Normally Distributed with a Mean