Question

The manager of a local retail store is ordering a specialty item from a supplier in Toronto. The lead time is constant at five days. The store is open 300 days a year (50 weeks Monday-Saturday), with the goal of maintaining stock. To determine the reorder point for this item and efficiently manage inventory, more information is needed regarding the demand rate, safety stock, and item cost

Answer 1

To determine the reorder point for a specialty item and efficiently manage inventory, you need to consider factors such as demand rate, lead time, and safety stock.

Step-by-step explanation:

To determine the reorder point for the specialty item and efficiently manage inventory, several factors need to be considered, including the demand rate, safety stock, and item cost. The reorder point is the inventory level at which a new order should be placed to avoid stock outs. It is calculated by adding the lead time demand (average daily demand multiplied by lead time) to the safety stock.

For example, if the demand rate is 10 units per day and the lead time is 5 days, the average daily demand is 2 units (10 units / 5 days). If the safety stock is 20 units, the reorder point would be 30 units (2 units * 5 days + 20 units).

By considering the demand rate, lead time, and safety stock, the manager can determine the reorder point and ensure the store maintains sufficient inventory.