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  • Reorder Point - Safety Stock

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    Sangeetha K S
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    Reorder point is calculated as average daily usage multiplied by the lead time in days plus a safety stock. The reorder point is equal to the reorder level plus the safety stock and is used to determine when to order more inventory. A practice problem demonstrates calculating the reorder point using the formula: reorder point = usage x lead time + stock out acceptance factor x square root of (usage x reorder quantity x lead time). Applying the formula to example values of usage, lead time, reorder quantity and acceptance factor results in a reorder point of 4,600 units.

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    Reorder Point _ Safety Stock

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    Reorder point is calculated as average daily usage multiplied by the lead time in days plus a safety stock. The reorder point is equal to the reorder level plus the safety stock and is used to determine when to order more inventory. A practice problem demonstrates calculating the reorder point using the formula: reorder point = usage x lead time + stock out acceptance factor x square root of (usage x reorder quantity x lead time). Applying the formula to example values of usage, lead time, reorder quantity and acceptance factor results in a reorder point of 4,600 units.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    111 views11 pages

    Reorder Point - Safety Stock

    Uploaded by

    Sangeetha K S
    Reorder point is calculated as average daily usage multiplied by the lead time in days plus a safety stock. The reorder point is equal to the reorder level plus the safety stock and is used to determine when to order more inventory. A practice problem demonstrates calculating the reorder point using the formula: reorder point = usage x lead time + stock out acceptance factor x square root of (usage x reorder quantity x lead time). Applying the formula to example values of usage, lead time, reorder quantity and acceptance factor results in a reorder point of 4,600 units.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 11

    Reorder Point & Safety

    Stock
    Dr Sharon K Jose
    Reorder level
    • Average daily usage X Lead-time in days
    Reorder point Vs Reorder Level
    • Reorder Point =Normal consumption during lead time +safety stock
    • Reorder Point =Reorder level + Safety stock
    Safety Stock Determination Practice problem
    Reorder Point Formula
    • Real-life situation the assumption of independence in the probability distribution made and
    example previously me not be valid if the number of the period is large in such cases the
    approach adopted will be using the reorder point formula given

    •  Reorder point = SXL+F √(SXRXL)  


    S= Usage in unit
    L= Lead time in days
    R=Average number of units ordered
    F=Stock out acceptance factor
    Practice problem
    • S=100 units
    • L=20days
    • R=2000 units
    • F=1.3
    • Reorder point =4600 units

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