Question

Calculate RBS Company’s Reorder Point including safety stock for the Pen Sets given the following information; Demand (D) is 100 Pen Sets per month. Lead Time (LT) from Supplier X is 15 days. Safety Stock (SS) is 10 Pen Sets.

Answer 1

To calculate RBS Company's Reorder Point, we find the daily demand of Pen Sets, multiply by the lead time, and add the safety stock. The calculation yields a Reorder Point of 60 Pen Sets, indicating that RBS should reorder when inventory levels reach this point.

Step-by-step explanation:

To calculate the Reorder Point (ROP) with safety stock for RBS Company's Pen Sets, we need to consider the daily demand, lead time, and safety stock levels. The Reorder Point formula is given by ROP = (Daily Demand × Lead Time) + Safety Stock. In this scenario, the Daily Demand is calculated by dividing the monthly demand by the number of days in a month, assuming a 30-day month. So, Daily Demand would be 100 Pen Sets / 30 = 3.33 Pen Sets/day.

Next, we convert the Lead Time to days. Given that the Lead Time from Supplier X is 15 days, we use it as it is. We then calculate the product of Daily Demand and Lead Time to find the base reorder level before adding safety stock, which is 3.33 Pen Sets/day × 15 days = 50 Pen Sets.

Finally, we include the Safety Stock, which is given as 10 Pen Sets. The complete Reorder Point calculation including safety stock is 50 Pen Sets + 10 Pen Sets = 60 Pen Sets.

Thus, RBS Company should reorder when the inventory level falls to 60 Pen Sets to prevent stockouts.

Answer 2

Reorder point = (Average Daily unit sales * Lead time) + Safety stock

Suppose one month of 30 days, Average daily unit sales = 100/30

Reorder point = ((100/30) * 15) + 10 = 60 units

Thus, RBS company needs to reorder when the stock reaches 60 units