Question

A newspaper publisher uses roughly 950 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 7 workdays. What is the appropriate reorder point quantity, given that the company desires a service level of 90 percent, if that stockout risk for various levels of safety stock is as follows: 1,500 feet, .10; 1,600 feet, .05; 2,400 feet, .02; and 2,600 feet, .01?

Answer 1

Answer:

Consider the following calculation

Explanation:

Given daily demand d= 870 feet

Lead time L = 6 days

Reorder point = Demand during lead time + Safety stock

Demand during lead time = dL = 870*6 = 5220

Safety stock = 1900 as service level ois 95 percent. So stockout risk = 1-0.95 =0.05.Given at stockout risk 0.05

safety stock = 1900

Reorder point = 5220 + 1900 = 7120