Question

A newspaper publisher uses roughly 890 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 5 workdays. What is the appropriate reorder point quantity, given that the company desires a service level of 95 percent, if that stockout risk for various levels of safety stock is as follows: 1,500 feet, 10; 1,700 feet, .05 1,800 feet, .02; and 2,800 feet, .01? Appropriate reorder point ft

Answer 1

Daily usage = 890 ft./day

Lead time = 5 days

Service level desired: 95 percent.

Hence, risk should be 1.00 – .95 = .05

This requires a safety stock of 1,700 feet.

ROP = expected usage + safety stock = 890*5+1700= 6,150 ft

So answer= 6150 feet