Final answer:
The reorder point (ROP) is calculated by finding the average daily demand, which is 133.2, and multiplying it by the lead time of 4 days, resulting in an ROP of approximately 533 units.
Step-by-step explanation:
The reorder point (ROP) is the level of inventory which triggers an action to replenish that particular inventory stock. It is primarily used in fixed-order quantity inventory systems, where a company places an order for the same number of items each time. In the scenario provided, where daily demand values are 133, 131, 141, 138, and 123, we need to calculate the average daily demand and then multiply it by the lead time (time from ordering to delivery) to find the ROP.
To calculate the average daily demand, add up the five daily demand values and divide by the number of values (5):
- (133 + 131 + 141 + 138 + 123) / 5 = 133.2
Since we assume that no safety stock is needed and the lead time is 4 days, the ROP is calculated as follows:
- ROP = Average daily demand × Lead time
- ROP = 133.2 × 4 = 532.8
Thus, the reorder point for the company's only product would be approximately 533 units (rounded up from 532.8). This is when they should place the order to replenish their inventory, assuming the basic fixed-order quantity inventory model is appropriate and without considering any safety stock.