1. Stevens manufactures component parts for the Department of Defense (DOD). There are a number of “C” that are used for the product structure. The Skid Brace Tube (SBT) is one such component part. Daily demand for the SBT is 75 units with a standard deviation of 15 units. The review period is 30 days, and the lead time is 5 days. At the time of the review there are 96 units in stock. If 98 percent of all SBT demand is to be satisfied from items in stock, how many units should be stocked? Assume working 300 days per year.

We define :

Protection period = Review period + Lead time = 30 + 5 = 35 days

Standard deviation of daily demand = 15 units

Therefore , Standard deviation of demand during protection period

= Standard deviation of daily demand x Square root ( Protection period )

= 15 x Square root ( 35 )

= 15 x 5.916

=88.74

Given , in stock probability ( 98 percent ) = 0.98

Corresponding z value = NORMSINV ( 0.98) = 2.053

Therefore Safety stock i.e. Quantity to be stocked

= Zvalue x Standard deviation of demand during protection period

= 2.053 x 88.74

= 182.18 ( 183 rounded to next higher whole number )

However out of above requirement , quantity which is already in stock = 96 units

Therefore, net units to be stocked = 183 – 96 = 87 units

87 UNITS TO BE STOCKED

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