Scenario 12.2 - Hamsterdam
Marlo Stanfield's operation also uses large quantities of prepaid cell phones,on average 1500 per week with a standard deviation of 145.The lead time for their own brand of prepaid cell phones is three weeks and they have a lot size of 350 phones.To ensure they never run out,they keep a safety stock of 500 phones with Proposition Joe.
-What safety stock should be held to put the fill rate at 0.99?
A)251 phones
B)145 phones
C)454 phones
D)100 phones

Question

Quizplus · Accepted Answer

To calculate the safety stock required to achieve a fill rate of 0.99, we can use the formula:

Safety stock = Z-score x standard deviation x lead time + buffer stock

where Z-score for 0.99 fill rate is 2.33 (from standard normal distribution table).

Plugging in the values, we get:

Safety stock = 2.33 x 145 x 3 + 500
Safety stock = 454.35

Rounding up to the nearest whole number, we get a safety stock of 454 phones, which is option C.