Final answer:
The purchasing manager can determine when to place orders for an item by considering the average demand and lead time data. They need to analyze historical demand data to understand the average number of units needed during a specific time period. By combining this data, the purchasing manager can calculate the reorder point.
Step-by-step explanation:
In the context of a manufacturer buying an item from its supplier, the purchasing manager can determine when to place orders for the item by considering the average demand and lead time data. The purchasing manager needs to analyze the historical demand data to understand the average number of units needed during a specific time period. Additionally, the lead time data helps determine how long it takes for an item to be delivered after the order is placed.
By combining the average demand and lead time data, the purchasing manager can calculate the reorder point. The reorder point indicates the inventory level at which a new order should be placed to prevent stockouts. For example, if the average demand for an item is 100 units per week and the lead time is 2 weeks, the reorder point would be 200 units (100 units per week x 2 weeks).
Once the purchasing manager reaches the reorder point, they can place a new order for the item. This allows for timely replenishment of inventory, ensuring that the manufacturer has enough stock to meet customer demand.