Probability of stock out for the current reorder point

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Reference no: EM13954756

The Operations Analyst for a company is studying the inventory stocking policy for a product (#A123). His records show that the demand per day is normally distributed with a mean of 210 and a standard deviation of demand of 5. Lead time is 4 days. The current reorder point is 860.

A) Compute the probability of stock out for the current reorder point.

B) The analyst has just been informed that the (above) standard deviation of daily demand was computed incorrectly. The corrected standard deviation is 7.07. What would be the correct reorder point be in order to retain the same probability of stockout (as in part (a))?

C) The analyst has some new information. His clerk has informed him that the lead time has changed to 5 days. What would the new reorder point be if the allowed probability of stockout is still the same as before?

Reference no: EM13954756

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