Safety Stock, Service Level \& Reorder Point Exercise You are a distributor of steel cables that are used in many kinds of construction applications. For a particular type of cable, you stock this product in reels of either 2,000 feet or 5,000 feet. (NOTE: for this exercise assume that 1 month =4 weeks.) 1. Your demand for the 5,000 -foot reels is 2,500 reels per month. The standard deviation of demand is 150 reels per month. Reorder lead-time is 8 weeks. How much safety stock do you need to achieve a service level of 95% ? 2. What is the reorder point for this level of service? 3. You are able to locate a new supplier who can deliver in 3 weeks. What would your reorder point be with a 3-week lead-time for a 95% service level? 4. Assume that your lead-time continues at 8 weeks as in " 1 " and " 2" above. You wish to raise your service level to 99%. How much additional safety stock will you need to carry? 5. If the cost of each reel is $300, how much additional cash will be tied up in safety stock to make this change? 6. Assume that you pay for this additional inventory by drawing on a line of credit. If the interest rate on this credit line is 6.5% per annum, and you carry this balance for one year, how much additional interest expense will you have incurred due to this increase in safety stock? 7. What other concerns/issues do you need to take into consideration in order to decide whether or not to make this investment