In a safety stock problem where both demand and lead time are variable, demand averages 200 units per day with a daily variance of 64, and lead time averages 6 days with a standard deviation of 1 day. How much safety stock is required for a 95% service level?
A) 331 units
B) 201 units
C) 417 units
D) 1,617 units
E) 1,530 units

Question

Quizplus · Accepted Answer

The safety stock is calculated using the formula: Safety Stock = Z * sqrt((average lead time * variance of demand) + (average demand^2 * variance of lead time)). For a 95% service level, Z is approximately 1.645. Plugging in the values: Safety Stock = 1.645 * sqrt((6 * 64) + (200^2 * 1)) = 331 units.

In a Safety Stock Problem Where Both Demand and Lead