# Safety most sells are the HP laser printer,

Safety stock =1.56*(30/7) * ?7 = 17.69 = 18 units

z = 1.56

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? = 30/7

L = 7 days

Safety stock = z*?*?L

The order will be placed when the inventory
level reaches 218 units. When the service level is at a 94% means, there is
0.94 probability, that the firm will meet the demand during lead time. It
means, the probability of stock out is 6%. When we calculate the safety stock,
it leaves us with 18 units of safety HP printers that will remain in stock
before we eventually run out of them.

R = (200/7) *7 + 1.56*(30/7) * ?7
= 200 + 17.69 = 217.69

z = 1.56

? = 30/7

L = 7 days

d = 200/7 units

Reorder point R = dL + z*?*?

In
the most part we need to understand that they are having a big ratio, with
those being out of stock and none to come for a week. Its making their job
harder for Kyle’s sales associated with the company. Therefore, Kyle Bits business
must see what can they do to gain a manufacturing team to produce more products
for them. If they want to expand the manufacturing company, then he would need to
acquire more businesses within. By doing so, this manufacturing company can
make more products that way they can sell quick. The problem they have with HP
laser printers is the demand is not consistent it be switching up and down,
which leads to less of them being manufactured. They are trying to accomplish
the sells for their company so, they can make more sell as other companies and
have advertising and more expansions. Kyle Bits and Bytes can lead to
purchasing printers if they can keep up with their business being manufactured,
but the demand may leave them with some or none as it continues to sell. The reorder
point; Inventory level at which order should be placed:

Kyle
Bits and Bytes has a retail business of computing products. This case Kyle’s
most sells are the HP laser printer, to be very important it gets sold out quickly.
This product is getting sold quick, is making an average on a weekly demand of
200 units, and the lead time is about one week. However, the demand is not
constantly. From the scenario Kyle has been observing that the weekly demand has
a standard deviation of 30. He needs to know when should he be placing an order/
reorder point, and inventory level so that there is no stock-out. If Kyle runs
out he won’t be able to fulfill an order due to stock-out, Kyle will lose all
the sales and possibly additional sale that has been placed. Kyle put a maximum
acceptable probability because he can’t be stock-out in a week at a 6%. In the
scenario Kyle Bits wants to know, what should be the re-order point and how
many HP laser printers should be in stock before running out.

Case 2: Kyle Bits and Bytes

We
have decided for the management, and as a vice president we would go with the
large-scale expansion. Just because it has a lower deviation as the calculation
shows on the Excel spreadsheet it will show the medium and large scales
operations.

Large
scale: 111.3553

Medium
scale: 52.20153

As
the standard deviation will follow to be measure for both data values. The
standard deviation will be calculated by the square root of the variance. The
lower the variance the lower risk it has, and the higher deviation will be considered
as a high risk. The standard deviation for both cases are:

Large
scale: 12,400

Medium
scale: 2,725

expansion project, because the large
scale has a lower expansion. For the medium scale, expansion is preferred for making
an objective of maximizing profit. However, they are expecting the value is not
enough to take an informed decision. But is also important to know how profits
can deviate from the expected value. Variance will be used for both risk
analysis to measures how far a set of random values are spread from the mean
value. The higher of variance means the random values are spread far from its
mean with a standard deviation. This will determine the risk factor for the
management to decide which one to pick. The variance for both expansion cases
are:

The medium scale expansion alternative has higher expected
value than the large-scale

Large scale expansion: \$140

Medium scale expansion: \$145

When dealing with an expected value is like anticipating with
a value of an action that comes with multiple outcomes. But first, we need to
determine the probability of the occurrence of each outcome of each medium scale
and high scale analysis. The expected value for the bell computer will be
calculated by multiplying each possible outcome, and by the probability of
occurrence of outcome, and adding all those values. The expected value of
medium scale expansion and large-scale expansion will help all the management to
choose the expansion option that is most likely to generate on a higher profit.
As we expected the value of the two expansions
are:

The bell computer company has two alternative expansion
options: a medium scale, and a large scale. The medium scale expansion and large-scale
expansion, has a demand to be in between low, medium, or high with a probability
of 0.2, 0.5, and 0.3 respectively. For the medium scale expansion, the profits
in case of low, medium and high demand is \$50,000, \$150,000 and \$200,000
respectively.  As for the large scaling
expansion, the profits are case of low, medium, and high demand of \$0, \$100,000
and \$300,000 respectively. Their management team is facing a big dilemma, they
can’t choose between the medium scale or the large-scale expansion. We are expecting
for the large-scale expansion, to have a greater potential to generate on a
higher profit in case of high demand scale, the large-scale expansion will
generate lower profit than the medium-scale expansion. In this case, they are
looking at the low profit demands, just because the large-scale expansion is results
as a nil profit. However, the medium-scale expansion is escalating more risk
than the large-scale expansion.

Case 1: Bell Computer Company

The bell computer company wants to do a determination on
which expansion to choose for the new computer products coming out. For this
case, we are going to determine whether to choose the expansion from the medium
scale or the large scale. Accordingly, the first case will show how to use the
mean and standard deviation of probability distributions to decide,
specifically by having expansion strategy. Additionally, the second case will help
determine the point in which a manager should re-order a printer so, they do
not run out of stock using normal distribution.