Suppose that the manager of a construction suupplyu house determined from historical records that demand for sand during lead time averages 60 tons. In addition, suppose the manager determined that demand during lead time could be described by a normal distribution that has a meand of 75 tons and a standard deviation of 3 tons. Answer the following questions, assuming that the maanger is willing to accept a stockout risk of no more than 2 percent. a. What value of z is appropriate? b. How much safety stock should be held? c. What reorder point should be used?
Continuous Probability Distributions
Probability distributions are of two types, which are continuous probability distributions and discrete probability distributions. A continuous probability distribution contains an infinite number of values. For example, if time is infinite: you could count from 0 to a trillion seconds, billion seconds, so on indefinitely. A discrete probability distribution consists of only a countable set of possible values.
Normal Distribution
Suppose we had to design a bathroom weighing scale, how would we decide what should be the range of the weighing machine? Would we take the highest recorded human weight in history and use that as the upper limit for our weighing scale? This may not be a great idea as the sensitivity of the scale would get reduced if the range is too large. At the same time, if we keep the upper limit too low, it may not be usable for a large percentage of the population!
Suppose that the manager of a construction suupplyu house determined from historical records that demand for sand during lead time averages 60 tons. In addition, suppose the manager determined that demand during lead time could be described by a
a. What value of z is appropriate?
b. How much safety stock should be held?
c. What reorder point should be used?
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