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Safety Stock and Re-order Point:

Demand for a component during its lead time is normally distributed, with a mean of 500 units and standard deviation of 20. The firm wishes to limit stockouts to an average of 1 in every 20 order cycles (service level should be 19/20).

(1) Determine what safety stock and re-order point should be used?

(2) If the company wants to provide a service level of 98%, what amount of safety stock it should provide?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M92555787

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