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1.(a) How much to order: Find the optimal ordering quantity.
(b) When to order: Find the reorder point necessary to provide a 98% service level.
(c) Suppose the production manager is asked to reduce the safety stock of this item by 50%. If she does so, what will the new service level be?
2. Chicago's Hard Rock Hotel distributes a mean of 1,000 bath towels per day to guests at the pool and in their rooms. This demand is normally distributed with a standard deviation of 100 towels per day, based on occupancy. The laundry firm that has the linen contract requires a 2-day lead time. The hotel expects a 98% service level to satisfy high guest expectations.
(a) What is the ROP? What is the safety stock?
(b) If the service level is set lower, do you expect to see less safety stock or more safety stock? Why?
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