A company is studying the inventory stocking policy for a product (#A123). The company uses a fixed-order quantity system to manage inventory. Demand per day is normally distributed with a demand per day of 210 and a standard deviation of 5 per day. Based on historical lead time of 4 days the current reorder point is set at 850 units.
The company has some new information about the supplier. Because of a natural disaster in the supplying country, the lead time has increased to 8 days.
Compute revised reorder point for the product.
Please see attached file if calculations do not appear clearly here.
The reorder point is calculated as
Re-order point = Average Lead Time*Average Demand + ...
The current reorder point is exhibited clearly.