Reorder point. This type of problem can be recognized when the demand rate (d ), lead time (LT), and desired service level or stockout risk are given. Use these steps to solve this type of problem: 1. Match the choice of formula to the standard deviation(s) that are given in the problem (e.g., if

Question

Reorder point. This type of problem can be recognized when the demand rate (d ), lead time (LT), and desired service level or stockout risk are given. Use these steps to solve this type of problem:
1. Match the choice of formula to the standard deviation(s) that are given in the problem (e.g., if both demand and lead time standard deviations are given, use Formula 12–15 for the ROP).
2. If the problem asks for the amount of safety stock, use the second part of the appropriate ROP formula.
3. If the “expected demand during lead time” and the “standard deviation of lead time demand” are given, use Formula 12–12.
ROP for variable demand and constant lead time. The housekeeping department of a motel uses approximately 400 bars of soap per day. The actual number tends to vary with the number of guests on any given night. Usage can be approximated by a normal distribution that has a mean of 400 and a standard deviation of 9 bars per day. A supply company delivers soap bars with a lead time of three days. If the motel policy is to maintain a stockout risk of 2 percent, what is the minimum number of bars of soap that must be on hand at reorder time, and how much of that amount can be considered safety stock?

Accepted Answer

[latex]\overline{d}[/latex]  = 400 bars of soap per day LT = 3 days
[latex]σ_d[/latex]  = 9 bars of soap per day Risk = 2 percent, so service level = 98 percent
From Appendix B, Table B, the nearest z value that corresponds to an area under the normal curve to the left of z for 98 percent is +2.05.
ROP =  [latex]\overline{d}[/latex] LT + z [latex]σ_d \sqrt{LT}[/latex] = 400(3) + 2.05(9) [latex]\sqrt{3}[/latex]
= 1,200 + 31.96, or approximately 1,232 bars of soap
Safety stock is approximately 32 bars of soap.

Question 12.p.4: Reorder point. This type of problem can be recognized when t...

Related Answered Questions

Computing Stockout Risk for the Fixed-Interval Model Given the following information: LT = 4 days OI = 12 days d = 10 units/day σ d = 2 units/day A = 43 units Q = 171 units Determine the risk of a stockout at a. The end of the initial lead time. b. The end of the second lead time. ...

Verified Answer:

Verified Answer:

Verified Answer:

ROP for variable demand rate and variable lead time. The motel replaces broken glasses at a rate of 25 per day. In the past, this quantity has tended to vary normally and have a standard deviation of three glasses per day. Glasses are ordered from a Cleveland supplier. Lead time is normally ...

Verified Answer:

Verified Answer:

Verified Answer:

Computing the ROP When Demand Is Variable A restaurant uses an average of 50 jars of a special sauce each week. Weekly usage of sauce has a standard deviation of 3 jars. The manager is willing to accept no more than a 10 percent risk of stockout during lead time, which is two weeks. Assume the ...

Verified Answer:

ROP for constant demand and variable lead time. The motel in the preceding example uses approximately 600 bottles of water each day, and this tends to be fairly constant. Lead time for water delivery is normally distributed with a mean of six days and a standard deviation of two days. A service ...

Verified Answer:

Verified Answer:

Verified Answer: