Question

the boss is concerned about this model because demand really varies. the standard deviation of demand was determined from a data sample to be 5.80 cans per day. the manager wants a 99.5 percent service probability. determine a new inventory plan based on this information and the data above.

Answer 1

To determine a new inventory plan based on the given information, we need to calculate the safety stock required to maintain the desired service level.

Step-by-step explanation:

To determine a new inventory plan based on the given information, we need to calculate the safety stock required to maintain the desired service level. The safety stock is the extra inventory kept to cover unexpected variations in demand.

To calculate the safety stock, we need to use the formula:

Safety Stock = (Z-score * Standard Deviation) * √Lead Time

Where:

• Z-score is the number of standard deviations from the mean required to achieve the desired service level.
• Standard Deviation is the measure of variability in demand.
• Lead Time is the time between placing an order and receiving it.

By plugging in the values from the given information, we can calculate the required safety stock.