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Demand for a product is normally distributed with a mean of 20 units per day and a standard deviation of 2 units per day. Lead time for this product is normally distributed with a mean of 15 days and a standard deviation of 3 days.
a. What reorder point provides a 50 percent service level?
b. What reorder point provides a 90 percent service level?
c. If the lead time standard deviation can be reduced from 3 days to 2 days, what reorder point now provides 90 percent service? How much is the safety stock reduced by this change?
d. If the demand standard deviation can be reduced from 2 units per day to 1, what reorder point now provides 90 percent service? How much is the safety stock reduced by this change?
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