Question

The reorder point is defined as the lead-time demand for an item. In cases of long lead times, the lead-time demand and thus the reorder point may exceed the economic order quantity Q*. In such cases, the inventory position will not equal the inventory on hand when an order is placed, and the reorder point may be expressed in terms of either the inventory position or the inventory on hand. Consider the economic order quantity model with

D = 9,000, C_o = $40, C_h = $2,

and 250 working days per year. Identify the reorder point in terms of the inventory position and in terms of the inventory on hand for each of the following lead times.

(a)

5 days

inventory position inventory on hand

(b)

15 days

inventory position inventory on hand

(c)

25 days

inventory position inventory on hand

(d)

45 days

inventory position inventory on hand

The reorder point is defined as the lead-time demand for an item. In cases of long lead times, the lead-time demand and thus the reorder point may exceed the economic order quantity Q*. In such cases, the inventory position will not equal the inventory on hand when an order is placed, and the reorder point may be expressed in terms of either the inventory position or the inventory on hand. Consider the economic order quantity model with

D = 9,000, C_o = $40, C_h = $2,

and 250 working days per year. Identify the reorder point in terms of the inventory position and in terms of the inventory on hand for each of the following lead times.

(a)

5 days

inventory position inventory on hand

(b)

15 days

inventory position inventory on hand

(c)

25 days

inventory position inventory on hand

(d)

45 days

inventory position inventory on hand

Answer 1

Solution :- From Given Doda. D = 9,000 66 = $40 ch= $2 8 250 working days. ante - Jaxaxcolch - x 9,000 x 40 = 720,000 - 300,000 at = 600 Daily Demand - web - h. 0 = 36 a. Inventory position Recorder point for 5 days o = 36 X 5 = 180 . As inventory position Recorder point for 5 days <=Q* points and on hand both inventory position recorder recordar point is 180. b. Inventory position Recorder point for 15 days & : 36X15 - 540 AS inventory position Recorder point for 15 days 2:0* both inventory position recorder points and on hand recorder point is 540

1. Inventary position recorda points for as days o s = 36 x 25 = 900 As inventory position recorder points by 25 days is se* so on-hand inventary recorde point is 900-600 = 200 as one order of Q* = 600 is outstanding . dl Inventory noru positon position recorder points for 45 days o de 36X45 - 1620. Inventary position recordar points for 45 days is at so on-hand invenboy recorder point is 1620-(@x600) = 420 as two orders of Q* = 600 are outstanding