If daily demand is normally distributed with a mean of 15 and standard deviation of 5, and lead time is constant at 4 days, 90 percent service level will require safety stock of approximately
A) 7 units
B) 10 units
C) 13 units
D) 16 units
E) 26 units

Question

Quizplus · Accepted Answer

To calculate the safety stock, we need to use the formula:
Safety Stock = Z * σ * LT^0.5
where Z is the z-score corresponding to the desired service level (90% in this case), σ is the standard deviation of demand, and LT is the lead time.

First, we need to calculate the z-score:
Z = InvNorm(0.9) = 1.28 (using a standard normal distribution table or Excel function)

Next, we can plug in the values:
Safety Stock = 1.28 * 5 * (4^0.5) = 13.02

Rounding to the nearest unit, we get Safety Stock = 13 units.

If Daily Demand Is Normally Distributed with a Mean of 15