Safety Stock and Reorder Point

Consider the following data.

Based on the below data:

• Calculate the safety stock quantities and the inventory cost associated with safety stock (based on the item unit cost) for the inventory items at four different service levels (50%, 80%, 90%, and 95%).
• Develop a table to present the inventory quantities and the safety stock costs at each service level.
• Assuming that demand occurs at a steady pace every month (in other words, there is no seasonality or cyclical change in the level of demand), calculate the reorder point for each item assuming a lead time of two months and a service level of 90%.
• Develop a table to present the reorder points for all products under these conditions (two month lead time and service level of 90%).

Inventory ItemAverage Demand (Annual)Sigma (Std. Dev.) of Demand During Lead TimeItem Unit Cost

F-1100115,000100$250.00

K-12002100,000300$2.00

L-13003250,000200$0.20

N-14004300,000400$1.00

P-2100150,00060$125.00

S-2200280,00075$30.00

Note: All items are independent demand items.