QUESTION 1 Use the following data for the next three questions: -Which of the fo

Question

QUESTION 1

Use the following data for the next three questions:

-Which of the four forecasts seems to have the most bias?

-Which of the above forecasts has lowest magnitude in relative terms?

-Which of the above forecasts will have the highest magnitude in actual (absolute) terms?

----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

QUESTION 2

A product has a mean demand of 50 with a standard deviation of 4. If the retailer wants to maintain a 99% customer service, how many units will they need to keep in stock?

QUESTION 3

If a product has a mean demand of 85 with a standard deviation of 13, if the customer holds 106 units in stock, what would the customer service be?

Explanation / Answer

Answer to Question 2 :

99% service level means in stock probability of 0.99 .

Corresponding value of Z for probability 0.99 = NORMSINV ( 0.99 ) = 2.3263

Therefore ,

Safety stock = Z value x Standard deviation of demand

                        = 2.3263 x 4

                         = 9.305 ( 10 rounding to next higher whole number )

NUMBER OF UNITS THEY WILL NEED TO KEEP IN STOCK = 10

Answer to question 3 :

Given ,

Standard deviation of demand = 13 units

Safety stock = 106 units

Let the corresponding Z value for customer service level = Z1

Therefore ,

Safety stock = Z1 x Standard deviation of demand

Or, 106 = 13 x Z1

Z1 = 106/13 = 8.153

Corresponding probability for Z1 = 8.153   ( using NORMSINV function) = 0.999999999999… ( i.e. almost 1 )

This will entail a service level of 100 %

CUSTOMER SERVICE LEVEL = 100 %

Note : Question 2 cannot be answered because it refers to “above forecasts” which are missing.

NUMBER OF UNITS THEY WILL NEED TO KEEP IN STOCK = 10

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.