A critical cost to making inventory decisions is stockout cost (the cost associated with not having a product available to meet demand). Therefore, Brit Group would like to hold a safety stock (also called buffer stock) to minimize the possibility of stockouts.

Brit Group's supplier found a way to reduce the average replenishment cycle from 12 to 3 days.

Assuming that both demand and lead time are normally distributed around the mean, calculate the safety stocks using the new information: Average daily demand = 1,250 units The standard deviation of daily demand = 250 Average replenish cycle = 3 days The standard deviation of the replenishing cycle = 1.53

Question: How many units do you recommend to have in safety stock under this new shorter cycle? show your calculations.