Determine the reorder point that would be required

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Reference no: EM13250418

The demand of an item is normally distributed with a mean of 60 units per day and a standard deviation of 5 units per day. Lead time is 4 days. A fixed-order-quantity model is used with an order quantity of 200. Assume 360 days in a year. Determine the reorder point that would be required for each of the following situations:

(i) to maintain a lead-time service level of 98.75 percent (i.e., probability of 0.9875 that demand will not exceed supply during the lead time or, equivalently, a 0.0125 risk of stockout during lead time), and

(ii) The reorder point to maintain a 98.75 percent annual service level (i.e., 98.75 percent of demand to be satisfied from stock).

Reference no: EM13250418

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