Daily demand for a product is 170 units, with a standard deviation of 30 units. The review period is 20 days and the lead time is 6 days. At the time of review there are 40 units in stock. If 98 percent service probability is desired, how many units should be ordered?

4,693.58 units

Explanation:

The computation of the number of unit to be ordered is shown below:

But before that we need to find out the standard deviation of review period and the lead time which is shown below:

= 152.97

Now the number of units to be ordered is

where,

T = Review period

L = Lead time

D = daily demand

I = Inventory

Z = service probability

Now placing these values to the above formula

So,

= 170 units ×  (20 + 6) + 2.05 × 152.97 - 40 units

= 4,420 units + 313.58 - 40  units

= 4,693.58 units

The 98% service probability is 2.05 and the same is to be considered

you will have $2593.74 in 10 years if you set aside $1,000 at 10%

you will have $9321.91 in 20 years if you set aside $2000 at 8%

you will have $1469.32 in 5 years if you set aside $1000 at 8%

you will have $1296.87 in 10 years if you set aside $500 at 10%

you will have $239.66 in 15 years if you set aside $100 at 6%

you will have $4660.96 in 20 years if you set aside $1000 at 8%