Proton in Asia is the vehicles main distributor. For all stock items, they annou

Question

Proton in Asia is the vehicles main distributor. For all stock items, they announce their level of cycle service is 90%. A single supplier who promises a lead time of four weeks will replenish their stock. a) A normally distributed demand with an average of 2000 units per week and standard deviation of 200 units per week, what ROL should they use for an item? b) By moving to a periodic review method with an interval of 2 weeks, what is the effect of it? c) For a level of cycle service 98%, what is the target stock level?

Explanation / Answer

a) ROL (Reorder Level) = Demand during lead time + Safety stock = dL+ z*d*L

ROL = (2000*4)+(1.282)*200*4 = 8512.8 = 8513 (approx)

b) ROL (periodic review) = d(t+L)+ z*d*(t+L) = (2000*(2+4))+(1.282)*200*(2+4) = 12628 (approx)

c) Service level 98% => z = 2.054

Target stock level (SS) = z*d*L = 2.054*200*4 = 822 (approx)

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