The demand for an item during the order period is known to be normally distributed with mean = 600 units and standard deviation = 50 units. What service level can the firm expect to offer (i) when it has 80 units of safety stock, and (ii) when it provides for average demand only? (iii) Also determine the safety stock if it is sought to provide a 99% service level to the customers

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(i) The given information is depicted in Figure 9.11. To determine the required probability, we shall find the area to the left of X = 680. We have, X- 680-600 50 1.6 From the normal area tables, the area between and z=1.6 equal 0.4452 and, thus, the area to the left of X= 680 is equal to 0.5 + 0.4452 = 0.9452. Service level at 80 units SS-94.52%. (ii) When provision is made for average demand only, the service level is naturally 50%. (iii) We know, Safety Stock = zo