Amy is in charge of maintaining hospital supplies at Omni Hospital. During the past year, the mean lead time demand for bandage CY-6 was 60. Furthermore, the standard deviation for CY-6 was 7. Amy would like to maintain a 90% service level. What safety stock level do you recommend for CY-6? (
To calculate the safety stock level for CY-6 bandage, we need to consider the mean lead time demand and the desired service level.
The safety stock level helps to account for uncertainties in demand during the lead time, ensuring that there is enough stock to meet customer demand without facing stockouts.
First, we need to determine the Z-score associated with the desired service level. The Z-score represents the number of standard deviations away from the mean that corresponds to a given probability. In this case, we want a 90% service level, so we need to find the Z-score that corresponds to the remaining 10% (1 - 0.90 = 0.10) probability.
Using a standard normal distribution table or a statistical calculator, we can find that the Z-score corresponding to a 10% probability is approximately 1.28.
Next, we calculate the safety stock level using the following formula:
Safety stock = Z-score * standard deviation of lead time demand
In this case, the Z-score is 1.28 and the standard deviation of lead time demand is 7. Plugging these values into the formula:
Safety stock = 1.28 * 7 ≈ 8.96
Therefore, I recommend maintaining a safety stock level of approximately 8.96 units for CY-6 bandage in order to achieve a 90% service level.