(a) Fill rate = Expected sales/ Mean demand = (mean demand – expected lost sales)/mean demand
Fill rate is given to be 95%
Therefore, target maximum expected lost sales = (1-95%)*mean demand = 5%*800 = 40
Target L(z) = 40 / Std dev = 40/120 = 0.3333
Corresponding z value = 0.1392 (taken from standard loss table corresponding to L(z) = 0.3333)
Therefore, Quantity of frozen pizza should be prepared = m+zs = 800 + 0.1392*120 = 817
(b) For stockout probability within 5%, stock-in probability = 95%
Corresponding z value = NORMSINV(0.95) = 1.645
Quantity of frozen pizza should be prepared = m + zs = 800 + 1.645*120 = 997
(c) The quantities differ, because fill rate is different from in-stock probability. Fill rate is measured as the ratio of expected sales versus mean demand, whereas in-stock probability is measured as probability of demand being less than or equal to stock available. Therefore, it makes sense that order quantity corresponding to in-stock probability would be higher.
“Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!”
What Students Are Saying About Us
.......... Customer ID: 12*** | Rating: ⭐⭐⭐⭐⭐"Honestly, I was afraid to send my paper to you, but splendidwritings.com proved they are a trustworthy service. My essay was done in less than a day, and I received a brilliant piece. I didn’t even believe it was my essay at first 🙂 Great job, thank you!"
.......... Customer ID: 14***| Rating: ⭐⭐⭐⭐⭐
"The company has some nice prices and good content. I ordered a term paper here and got a very good one. I'll keep ordering from this website."