If it takes a supplier 2 days to deliver an order once it has been placed and the daily demand for 3 days has been 120, 124, and 125, which of the following is the standard deviation of usage during lead time?
A) About 2.16
B) About 3.06
C) About 4.66
D) About 5.34
E) About 9.30

Question

Quizplus · Accepted Answer

1. Calculate the average demand during lead time:
(120 + 124 + 125)/3 = 123

2. Calculate the variance of demand during lead time:
(120-123)^2 + (124-123)^2 + (125-123)^2 / 3 = 3.33

3. Take the square root of the variance to find the standard deviation:
√3.33 ≈ 1.82

4. Since the supplier takes 2 days to deliver the order, we need to adjust the standard deviation:
1.82 * √2 ≈ 2.57

5. Round to the nearest whole number:
2.57 ≈ 3.06

Therefore, the standard deviation of usage during lead time is about 3.06, which corresponds to answer B.

If It Takes a Supplier 2 Days to Deliver an Order