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Zegema Retail is analyzing its inventory levels to optimize the stock of a particular specialty good. The following data has been collected for a specific
Zegema Retail is analyzing its inventory levels to optimize the stock of a particular specialty good. The following data has been collected for a specific SKU (Stock Keeping Unit): Average monthly demand: 500 units Lead time for replenishment: 2 months Desired service level: 95% Standard deviation of monthly demand: 50 units Given this information: Calculate the reorder point (ROP) for this SKU, considering the lead time and desired service level. Assume a normal distribution of demand. Determine the safety stock required to maintain the 95% service level. If Zegema Retail wants to increase the service level to 99%, how does this affect the safety stock and reorder point? Calculate the new values. Discuss the implications of increasing the service level on inventory costs and customer satisfaction. Use the calculated safety stock and reorder points to support your analysis
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