Question

A newspaper publisher uses roughly 840 feet of baling wire each day to secure bundles of newspapers while they are being distributed to carriers. The paper is published Monday through Saturday. Lead time is 4 workdays. What is the appropriate reorder point quantity, given that the company desires a service level of 99 percent, if that stockout risk for various levels of safety stock is as follows: 1,600 feet, .10; 1,900 feet, .05; 2,100 feet, .02; and 2,300 feet, .01?

Appropriate reorder point: ft

Answer 1

Reorder point is the quantity level that is reached when the inventory on hand drops to this level. The four determinants of the reorder point quantity are the usage rate, lead time, demand variability, lead time variability and the degree of stock out risk.