Pet Place sells pet food and supplies including a popular ba

Pet Place sells pet food and supplies including a popular bailed hay for horses. When the stock of this hay drops to 20 bails, a replenishment order is placed. The store manager is concerned that sales are being lost due to stock outs while waiting for a replenishment order. It has been previously determined that demand during the lead-time is normally distributed with a mean of 15 bails and a standard deviation of 6 bails. The manager would like to know the probability of a stockout during replenishment lead-time. In other words, what is the probability that demand during lead-time will exceed 20 bails? Compute to 2 decimal places.

Solution

In other words, what is the probability that demand during lead-time will exceed 20 bails?

P( x > 20 )

P( z > [20 - 15] / 6 )

P( z > 0.83)

probability you will find in the tables of Z distribtuion (normal distribution)

P( z > 0.83) = 0.20