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.

Assuming that both demand and lead time are normally distributed around the mean, calculate the safety stocks using the following information: Average daily demand = 1,250 units The standard deviation of daily demand = 250 Average replenish cycle = 12 days The standard deviation of replenishing cycle = 1.53

Question: How many units do you recommend having in safety stock? show your calculations.