What is the probability that a company does not experience a stockout if they have an...

What is the probability that a company does not experience a stockout if they have an average demand during lead time of 120 units and a standard deviation during lead time of 20 units and assuming that their ROP is set to 159 units} .Also note that demand during lead time follows a normal distribution

Expert Solution

Probability that company does not experience stock out is 0.948 or 94.8%.

Given the values for ROP, Demand during lead time we can find the value of safety stock with the help of the equation used in determination of Reorder point(ROP). After finding safety stock, given the standard deviation during lead time we can find Z statistic value corresponding to the service level. Then from service level we get the value of our probability of no stock out.

All the steps and calculations are given below :

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keosha answered 6 months ago

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