Problem 1 The daily demand for integrated circuit boards for Reliance Computers, which assembles computers, is 80 units. The daily demand is normally distributed and has a standard deviation of 6 units. The lead time from the supplier is a constant of 9 days. If Reliance Computers is willing to accept a stock risk of 7%, what is the Reorder Point and how much of the inventory is Safety Stock?

Problem 2 The desired service level for a sporting good store’s inventory of string bathing suits is 85%. The average demand during the replenishment period is 180 suits with a standard deviation of 30 suits.

a) What is the reorder point?

b) If the store wants to increase its service level to 91% for the suits, what is the reorder point and safety stock?

Problem 3 An automobile service station uses 900 cases of motor oil annually. The station operates 300 days a year. The order replenishment lead time for motor oil is 4 days and the daily demand has a standard deviation of 4 cases per day. The station has specified service level of 97%.

a) What is the level of safety stock required assuming that demand during lead time is normally distributed?

b) If the station decides to hold only 6 cases of motor oil as safety stock what is the stock out risk?