Victoria Blunt is in charge of maintaining hospital supplies at Mercy Hospital. During the past year, the mean lead time demand for bandage BX-5 was 600. Furthermore, the standard deviation for BX-5 was 70. Ms. Blunt would like to maintain a 95% service level.
(a) What safety stock level do you recommend for BX-5?
(b) Victoria has just been severely chastised for her inventory policy. Dwight Seymour, her boss, believes that the service level should be 99%. Compute the safety stock levels for a 99% service level.
(c) Victoria knows that the carrying cost of BX-5 is $0.50 per unit per year. Compute the carrying cost associated with 95% and 99% service levels.