Question: Problem #4

Ned’s Natural foods cells unshelled peanuts by the kilogram. Historically, Ned had observed that daily demand is normally distributed with a mean of 80 kg and a standard deviation of 10 kg. Lead time is 7 days.

a) What ROP would provide a stockout risk of 10% during lead time? (type 1 service)

b) What is the associated expected number of units (kg) short per cycle?