Question

Annual demand for the notebook binders at​ Duncan's Stationery Shop is 9 comma 700 units. Dana Duncan operates her business 300 days per year and finds that deliveries from her supplier generally take 5 working days. Calculate the reorder point for the notebook binders that she stocks.

Answer 1

Annual demand (D) is 9700 units.

Number of Working days = 300 days per year

Lead time = 5 working days.

Calculate the Re-Order Point (ROP) using the following formula:

ROP = (Demand per day) x (lead time for a new order in days)

ROP = d x L

Where,

d = D / Number of working days

Substitute the values in equation (1)

ROP = (D / Number of working days) x Lead time

ROP = (9700 / 300) x 5

ROP = 161.67

ROP = 162 units

Thus, the Re-Order Point (ROP) is 162 units.