For any given period, your company’s goal is to have required materials available in inventory 99.9% of the time.

Given the following historical data on two alternative suppliers of a critical material your company requires, which of the two suppliers (supplier 1 or supplier 2) will minimize your required safety stock? Show and describe your analysis!

Base your analysis on the supplied data and assume “all else is equal” between the two suppliers. In other words, cost per unit, quality, TCO, etc. do not need to be considered. Do not concern yourself with any other issues or data other than that which is given below.

Your mean requirement (demand) per day: 700 units.

Standard deviation of your daily requirement: 65 units.

Supplier 1

Mean lead-time: 7 days

Standard deviation of lead-time: 1 day

Supplier 2

Mean lead-time: 5 days

Standard deviation of lead-time: 2 days

 

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