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Annual demand for a product is 11,960 units; weekly demand is 230 units with a standard deviation of 50 units. The cost of placing an order is $125, and the time from ordering to receipt is four weeks. The annual inventory carrying cost is $0.80 per unit.

a. To provide a 98 percent service probability, what must the reorder point be? (Use Excel's NORMSINV() function to find the correct critical value for the given α-level. Do not round intermediate calculations. Round "z" value to 2 decimal places and final answer to the nearest whole number.)

Reorder point units

b. Suppose the production manager is told to reduce the safety stock of this item by 125 units. If this is done, what will the new service probability be? (Use Excel's NORMSDIST() function to find the correct probability for your computed Z-value. Round your answer to the nearest whole number.)

Service probability %

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M92444365

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