To accommodate demand uncertainty in its inventory managemen…
To accommodate demand uncertainty in its inventory management policy, a medical supply company tracks the demand for test kits during the supplier’s lead time. The average demand during lead time is 420 kits, and the standard deviation is 12 kits. According to company policy, stockouts should occur no more than 2 percent of the time. Service Level (%) Z 65 0.38 69 0.50 75 0.67 80 0.84 85 1.04 90 1.28 92 1.41 94 1.56 95 1.65 96 1.75 97 1.88 98 2.06 99 2.33 Questions: Based on the company’s stockout policy, what is the appropriate reorder point to meet the desired service level? [rop] The company decides to increase the reorder point. Which of the following statements provides an appropriate reason for this decision?[reason]
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