Question

The corner store carries milk (in cartons) in their refrigerator. The store can place an order every week (i.e., 7 days). It takes about 3 days for the order to be delivered. Every month, the store is observed to have an average demand of 500 cartons of milk. The store wants to maintain a safety stock of 100 cartons. Currently, the store has 200 cartons of milk in stock. What is the reorder point for the corner store in terms of the number of cartons of milk?

a. 150 cartons
b. 200 cartons
c. 250 cartons
d. 300 cartons

Answer 1

The reorder point for the corner store is 250 cartons, calculated based on the lead time demand of 50 cartons, and a safety stock of 100 cartons.

Step-by-step explanation:

The reorder point for the corner store is calculated by considering the lead time in days for an order to arrive and the daily demand of milk cartons. Since it's mentioned that the monthly demand is 500 cartons, we can calculate the daily demand by dividing 500 cartons by 30 days (assuming an average month), which gives us approximately 16.67 cartons per day. Given the lead time of 3 days for delivery, you would multiply this daily demand by the lead time (16.67 cartons/day * 3 days = 50.01, rounded to 50 cartons). Lastly, the store wants to maintain a safety stock of 100 cartons at all times. Therefore, the reorder point would be the sum of the lead time demand plus the safety stock, which equals to 150 cartons (lead time demand) + 100 cartons (safety stock) = 250 cartons.