Question

The demand for an item is normally distributed with an average annual demand of 8000 units, and with a standard deviation of demand during the lead time of 6 units. The lead time for this item is a constant 3 days. Calculate the reorder point using a 95 percent in-stock probability (Z = 1.65) and assuming 365 days per year.

Answer 1

76

Explanation:

D= 8000 units

standard deviation of demand during the lead time σ_LT= 6 units

lead time =3 days

z= 1.65

n= 365 days

d= D/n = 8000/365 = 21.9 units/day

ROP = (LT×d)+ Zσ_LT = (3×8000)+ 1.65×6

=65.7+9.9= 75.6≅76

the reorder point using a 95 percent in-stock probability (Z = 1.65) and assuming 365 days per year = 76