Question

Referring to the previous data for Retailer Mojo: Suppose the

stdev of daily demand is 25 units. The safety stock the retailer
will carry if she chooses Supplier Y is
a.89 units
b.121 units
c.0
d.115 units

Answer 1

The safety stock the retailer will carry if she chooses Supplier Y is 32.5 units.

Step-by-step explanation:

The safety stock that the retailer will carry if she chooses Supplier Y can be calculated using the formula: Safety Stock = (Service Level Factor) * (Standard Deviation of Daily Demand).

Since the standard deviation of daily demand is given as 25 units, we need to determine the service level factor.

The service level factor depends on the desired level of service. Assuming a normal distribution, a service level factor of 1.28 corresponds to a 90% service level. Since Supplier Y has a service level of 89%, which is lower than 90%, we can use a service level factor slightly higher than 1.28, such as 1.3.

Therefore, the safety stock the retailer will carry if she chooses Supplier Y is approximately 1.3 * 25 = 32.5 units.