Chicago's Hard Rock Hotel distributes a mean of 977 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 linen contract requires a 3-day lead time. The hotel expects a 97% service level to satisfy high guest expectations.

a) What is the reorder point?
b) What is the safety stock?

A.3257 towels

B.325 towels

Explanation:

A.

d=977 bath towels per day

standard deviation =100 towels per day

Lead time= 3 days

97% Service level = 1.88

Hence:

977*3+1.88*100√3

=2931+1.88*173

=2931+325.24

=3256.24

Approximately 3257 towels

The reorder point is 3257 towels

B.

1.88 ×100√3

=1.88×173

=325 towels

The safety stock is 325 towels

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