1. Weekly demand for smartphones at the Apple store is normally distributed with a mean  =300 and a standard deviation of  =200. Foxconn, the assembler takes two weeks to supply an order from the Apple store. Apple is targeting CSL of 95% and monitors its inventory continuously. a. How much safety inventory of smartphones should Apple carry? b. What should its ROP be?

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Walker

9 March, 11:38

1. Weekly demand for smartphones at the Apple store is normally distributed with a mean  =300 and a standard deviation of  =200. Foxconn, the assembler takes two weeks to supply an order from the Apple store. Apple is targeting CSL of 95% and monitors its inventory continuously. a. How much safety inventory of smartphones should Apple carry? b. What should its ROP be?

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Schneider · Answer 1

(a) 464 units

(b) 1,064 units

Explanation:

Given that,

Mean, M = 300

Standard deviation, SD = 200

Targeting CSL = 95%

Z-value for the 0.95 = 1.645 (Obtained from the Z-tables)

Lead time, L = 2

Standard deviation during lead time = SD * √L

= 200 * √2

= 200 * 1.41

= 282

Safety stock = z * Standard deviation during lead time

= 1.645 * 282

= 463.89 or 464 units

ROP = (M * L) + Safety stock

= (300 * 2) + 464

= 600 + 464

= 1,064 units