Answer:
517 safety stock is required for a 90% service level
Explanation:
In this question, we are tasked with calculating the amount of safety stock required for a 90% service level.
From the question, we can identify the following;
Demand d = 200 units per day
Daily standard deviation = 25
Lead time average = 5 days
Standard deviation of lead time = 2 days
Amount of safety stock = 90%
The z-score for 90%(0.9) confidence interval = 1.28
Mathematically;
Safety stock SS = z × [tex]\sqrt{} \s[/tex](Daily standard deviation)^2(Lead Time) + (standard deviation of lead time)^2(demand)^2
Plugging the values into the equation above, we have;
Safety stock SS = √(25)^2(5) + (2)^2(200)^2
Safety stock SS = 1.28 × √3125 + 160,000
SS = 1.28 × √163,125 = 1.28 × 403.89 = 516.98 which is approximately 517
