Question

The annual demand for a product is 1,000 units. The company orders 200 units each time an order is placed. The lead-time is 6 days. There are 250 working days per year. If the reorder point is 50, what safety stock are they using?

Answer 1

Answer:Safety stock= 26 units

Step-by-step explanation:

Annual demand = 1,000

Working days = 250 days per year

Demand per day = 1000/ 250 = 4 units per day

Lead Time demand = Lead time x Average sales per day

= 6 days lead time x 4 units per day = 24 units

reorder point= Lead time demand + Safety stpock

Safety stock = Reorder point - lead time demand

= 50 - 24 units

Safety stock= 26 units