Compute the safety stock (S.S.) and reorder point (ROP) for the following situation: Annual Demand =...
Compute the safety stock (S.S.) and reorder point (ROP) for the following situation:
- Annual Demand = 6570 units
- Unit Price = $11 and no quantity discounts
- Ordering Cost = $25/order
- Holding Cost = $1.50/unit
- Lead Time = 5 days
- Desired Customer Service Level = 97.5%
Assume 365 days/year and that demand and lead time are constant.
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Safety Stock = 10; ROP = 90 |
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Safety Stock = 0; ROP = 90 |
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Safety Stock = 5; ROP = 150 |
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Safety Stock = 0; ROP = 66 |
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Safety Stock = 5; ROP = 18 |
Homework Answers
1. SS = 0 , ROP = 90
DEMAND = 18(ANNUAL DEMAND / NUMBER OF WORKING DAYS)
SAFETY STOCK = Z * STANDARD DEVIATION OF DEMAND * SQRT(LEAD
TIME)
SINCE STDEV = 0, SS = 0
ROP = DEMAND * LEAD TIME = 18 * 5 = 90
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