Demand for a particular SKU of khaki pants at an online/catalog retailer is forecasted to be Normally distributed with a mean of 1,200 units per month and a standard deviation of 100 units per month.
a. What is the probability that demand will exceed 1,000 units next month?
b. What is the probability of shortage if 1,050 units are produced?
c. How many units should be produced for a 90% service level (a 10% chance of not meeting demand)?
d. What production level would result in a 70% chance of stocking out (incurring a shortage)?
Under what conditions would such a policy be useful?