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A paint retail store observed that its daily demand is normally distributed, with a mean of 26 gallons and a standard deviation of 10 gallons. The lead-time for receiving an order of paint from the distributor is 9 days. Since it is the only paint store in town, the manager is interested in maintaining only a 75% service level ((Z = 0.6745).
a) What reorder point should be used?
b) Subsequently, the manager found out that a new paint store is coming to town and he is thinking of how to handle the competition. He has two options, one is to reduce the lead-time by 30% or increase the service level to 90% (Z = 1.2815). Which option would you suggest and why? Explain.
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