In: Operations Management
Fresh Market is open 350 days a year. Daily use of cash register tape (daily demand) has a mean of 20 rolls and a standard deviation of 5 rolls. It takes nine days for Fresh Market to receive the order it placed with its register tape supplier. What level of safety stock of the register tape does Fresh Market need to carry, in order to guarantee that the register tape does not run out 95% of the time (the corresponding z-value is 1.6)?
Safety stock refers to extra stock level that is maintained in order to eliminate the risk of shortage of stocks because supply and demand may vary. Safety stock is calculated based on the lead time and demand. Lead time refers to the time when the order is placed or produced till the time the item is ready for sale or delivery to the customers.