A products with an annual demand of 1000 units has EOQ
(Economic Order Quantity) = 80. The demand during the lead
time follows a normal probability distribution with µ = 25 and ϭ =5
during the reorder period.
How much safety stock is required, if the firm desires at most a
2% probability of a stockout on any given order cycle?
If a manager sets the reorder point at 30, what is the
probability of a stockout on any given order cycle? How many times
would you expect to stockout during the year, if this reorder
points were used?