Question: Western Outfitters, Inc.

Western Outfitters is a prominent manufacturer of casual denim clothing in Durango , Colorado . The denim used daily in their manufacturing process to produce jeans is normally distributed with an average of 3,000 yards of denim and a standard deviation of 600 yards. The lead time to receive an order of denim cloth from Long Island Textiles, their primary supplier, is a constant six days.

a. Determine the safety stock and reorder point if Western Outfitters wishes to limit the probability of a stockout and work stoppage to a minimum of 5%.

b. Determine the service level provided by a safety stock level of 2,000 yards.

c. If a manager at Western Outfitters sets the reorder point for denim cloth at 20,000 yards, determine the probability of a stock-out on any given order cycle. Determine the number of times the manager should expect a stock-out during the year if this reorder point were used.