Annual demand for a particular halogen bulb is D = 12800 at a business that oper

Question

Annual demand for a particular halogen bulb is D = 12800 at a business that operates 320 days per year. The cost per order, S, is dollar 12 and the holding cost per unit per year is dollar 3. If the lead time is 16, and demand during lead time follows a normal distribution with a mean of 640 and a standard deviation of 100, what level of safety stock is required to ensure a 90 percentage service level? (Determine the z value to the 2nd decimal digit only.) Specify as a whole number by rounding the final calculation. Answer:

Explanation / Answer

Safety Stock is given as

= Z(@ 90% service level) * SQRT( Expected Lead time * Standard deviation of demand ^2 + (Expected Demand*Standard deviation of Lead time)^2),

Lead time = 16 , Standard deviation of demand = 100, Mean demand = 640,

= 1.28 * SQRT( 16*100^2+0)

=1.28 * 4* 100

= 512 Halogen bulbs

Z @ 90% service level = 1.28

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