Question

Lead time for one of your fastest- moving products is 21 days. Demand during this period averages 100 units per day.a) What would be an appropriate reorder point?b) How does your answer change if demand during lead time doubles?c) How does your answer change if demand during lead time drops in half?

Answer 1

Answer:

The answer would be

a. 2,100 units

b. 4,200 units

c. 1,050 units

Explanation:

a. The formula is used to compute the appropriate reorder point which is shown below:

= (lead time × average units per day) + safety stock

= 21 × 100 units + 0

= 2,100 units

b. If demand doubles, than the reorder point will be

= (lead time × average units per day) + safety stock

where,

average unit = 2 × units given

                      = 2 × 100

                      = 200 units

= 21 × 200 units + 0

= 4,200 units

c. If demand half,  than the reorder point will be

= (lead time × average units per day) + safety stock

where,

average unit = 50% × units given

                      = 50% × 100

                      = 50 units

= 21 × 50 units + 0

= 1,050 units

Hence, the answer would be

a. 2,100 units

b. 4,200 units

c. 1,050 units