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The current reorder point

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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.

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Solution Preview

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 + ...

Solution Summary

The current reorder point is exhibited clearly.