Introduction to Management Science 12th Edition by Bernard Taylor

Exercise 47

PM Computers in Problem is considering purchasing monitors from an American manufacturer that would guarantee a lead time of 8 days, instead of the Taiwanese company. Determine the new reorder point, given this lead time, and identify the factors that would enter into the decision to change manufacturers.
Problem
PM Computers assembles personal computers from generic components. It purchases its color monitors from a manufacturer in Taiwan; thus, there is a long and uncertain lead time for receiving orders. Lead time is normally distributed, with a mean of 25 days and a standard deviation of 10 days. Daily demand is also normally distributed, with a mean of 2.5 monitors and a standard deviation of 1.2 monitors. Determine the safety stock and reorder point corresponding to a 90% service level.