REORDER POINT (ROP)

Lead Time 5 days

Average Usage 18 units
Annual Carrying Cost 30 per unit
Stockout Cost 150 per unit
Number of Order per year 12 orders per year

Lead Time Demand 90

ROP

Usage during
Reorder Probability of Number of
period this usage Usage
75 10% 10
85 8% 8
95 6% 6
105 4% 4
115 2% 2

TOTAL ANNUAL
SAFETY EXPECTED ANNUAL COST OF BEING OUT
ROP STOCK (SS) NUMBER SHORT COST (EAC) OF STOCK
90 0 5 540
15 1,080
25 900 2,520
95 5 10 720
20 720 1,440
105 15 10 360 360
115 25 0 0 0

COST OF SAFETY STOCK

SAFETY COST OF BEING ANNUAL CARRYING
ROP STOCK (SS) OUT-OF-STOCK COST TOTAL COST/YEAR
90 0 2,520 0 2,520
95 5 1,440 150 1,590
105 15 360 450 810
115 25 0 750 750