Question

A newspaper publisher uses roughly 900 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 6 workdays. What is the appropriate reorder point quantity, given that the company desires a service level of 98 percent, if that stockout risk for various levels of safety stock is as follows: 1,600 feet, 10; 1,800 feet, .05; 1,900 feet, .02; and 2,100 feet, .01? Appropriate reorder point

Answer 1

Daily usage of bailing wire is 900 feet

Lead time is 6 workdays

Service level is given as 98% ( 1.00-0.98 = 0.02)

For 0.02, safety stock is given as 1800 feet

Reorder point:

Reorder point = (Demand * Leadtime) + Safety stock

= 900*6 + 1800

= 7200 feet

Hence the reorder point is 7200 feet.