Question

Lead time for one of your​ fastest-moving products is 24 days. Demand during this period averages 110 units per day. ​a) What would be an appropriate reorder​ point? nothing units ​(enter your response as a whole​ number). ​b) How does your answer change if demand during lead time​ doubles? nothing units ​(enter your response as a whole​ number). ​c) How does your answer change if demand during lead time drops in​ half? nothing units ​(enter your response as a whole​ number).

Answer 1

a.) reorder point = 2,640 units

b.) reorder point = 5,280 units (reorder point doubles)

c.) reorder point = 1,320 units (reorder point drops in half)

Step-by-step explanation:

Reorder point is the inventory level (point) at which action is taken (order placed) to replenish the stocked item. It is calculated as follows:

Reorder point = (Lead time × average daily sales) + safety stock

Lead time = 24 days

average daily sales = 110 units

safety stock = 0 (not given)

a.) reorder point = (Lead time × average daily sales) + safety stock

reorder point = (24 × 110) + 0 = 2,640 units

b.) if demand during lead time doubles:

lead time = 24 days

average daily sales = (110 × 2) = 220

∴ reorder point = 220 × 24 = 5,280 units

Therefore the reorder point doubles

c.) if demand during lead time drops in half:

lead time = 24 days

average daily demand = (110 ÷ 2) = 55 units

∴ reorder point = 24 × 55 = 1,320 units

Therefore the reorder point drops in half.