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Safety stock for a spare part in Dubai
The prompt
A fictional distributor in Dubai sells an air-conditioner part. It sells 400 units a day on average, with a standard deviation of 120 units a day. It buys from a factory in China with a lead time of 25 days by sea. Each unit costs AED 150 and the holding cost is 25 percent a year. How much safety stock does it need for 95 and for 99 percent service? What does the extra reliability cost? And what would a supplier with a 9-day lead time save?
Your interviewer will share data as you ask for it. Ask clarifying questions, state a hypothesis, then lay out your structure out loud before you calculate.
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