Question

Barbara Flynn is in charge of maintaining hospital supplies at General Hospital. During the past​ year, the mean lead time demand for bandage​ BX-5 was 70 ​(and was normally​ distributed). Furthermore, the standard deviation for​ BX-5 was 8. Ms. Flynn would like to maintain a 95​% service level. z=1.65

a. What safety stock level do you recommend for BX-5?
b. What is the appropiate reorder point?

Answer 1

Given:

Service level = 95%

z = 1.65

Standard deviation = 8

Lead time demanded = 70

To find:

a. Safety stock level for BX-5

b. Appropriate reorder point

Solution:

The formula to calculate the safety stock is as follows,

$\text{Safety stock }= \text{z}\times \text{Standard deviation}$

On plugging-in the values we get,

$\Rightarrow \text{Safety stock} = 1.28\times8=10.24$

a. Therefore, the safety stock for BX-5 is 10.24

The formula to calculate the reorder point is as follows,

$\text{Reorder point = Lead time demand + Safety stock}$

On substituting the values we get,

$\Rightarrow \text{Reorder point} = 70+10.24 = 80.24$

b. The appropriate reorder point is 80.24