Inventory Re-order Point

Inventory re-order point with random demand, where we assume that we are trying to achieve a certain probability of not running out of inventory during each order cycle.
An order cycle is the time between when we place one order and then when we place the next one.
An order arrives, and we have plenty of inventory. Then the inventory will go down low enough to reach our re-order point, and we will place an order.
Hopefully we don't run out of inventory while we are waiting for that order to arrive.
So how low should we let inventory get before placing that order? That is the answer this formula solves. In this example, we want a 98% chance that we don't run out. So that means 2% of the time, we will run out. But mostly, we won't.