Question: Management has stated that it will tolerate one stockout per year. The forecast of annual demand for a particular SKU is 100,000 units, and it

Management has stated that it will tolerate one stockout per year. The forecast of annual demand for a particular SKU is 100,000 units, and it is ordered in quantities of 10,000 units. The lead time is 2 weeks. Sales history for the past 10 weeks follows.

Calculate:

a. Sigma for the history time interval.

b. Sigma for the lead time interval.

c. The service level.

d. The safety stock required for this service level.

e. The order point.

Week Actual Deviation Deviation Demand Squared 1 2100 2 1700 3 2600 4 1400 5 1800 6 2300 7 2200 8 1600 9 2100 10 2200 Total LO.1

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