Answered

Chicago's Hard Rock Hotel distributes a mean of 1,000 bath towels per day to guests at the pool and in their rooms. This demand is normally distributed with a standard deviation of 100 towels per day, based on occupancy. The laundry firm that has the linens contract requires a 2-day lead time. The hotel expects a 98% service level to satisfy high guest expectations.


Required:
a. What is the reorder​ point?
b. What is the safety stock?
c. What is the ROP?

Answer :

Tundexi

Answer:

1. Reorder point = 2,290 towels

2. Safety shock = 290 towels

Explanation:

1. Reorder Point

ROP = (Average daily demand * Lead time in days) + Z*б(dlt)

Z= No of SD depending on the service level of 98%

б(dlt) = SD in demand during the lead time

We derive б(dlt) given the SD in demand б(d) = 100 towels/day using the formula

б(dlt) = б(d) *[tex]\sqrt{ Lead time}[/tex] .................(2)

Where the lead time = 2 days

Substitute in equation 2, the value of б(d) = 100 towels/day and Lead time = 2 days to obtain

б(dlt) = 100 * [tex]\sqrt{2}[/tex]

б(dlt) = 100 * 1.4142

б(dlt) = 141.42 towels

Substitute in equation (1), Z = 2.05 for a service level of 98%

Average daily demand = 1,000 towels, Lead time = 2 days, б(dlt) = 141.42 towels to obtain

ROP = (1,000 * 2) + 2.05*141.42

ROP = 2,290 towels

b. Safety shock  

The safety shock = Z * б(dlt)

Substitute the value of Z = 2.05 and б(dlt) = 141.42 towels to obtain

The safety shock = 2.05 * 141.42

The safety shock = 290 towels

Other Questions