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2 May, 20:57

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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  1. 2 May, 23:55
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    (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
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