Safety Stock and the Reorder Point with Safety Stock La Cucina Company sells kit

Question

Safety Stock and the Reorder Point with Safety Stock La Cucina Company sells kitchen supplies and housewares. Lava stone is used in production of molcajetes (mortars and pestles in the making of guacamole) and is purchased from external suppliers. Each year, 8,000 kilograms of lava stone is used: it is u evenly at the rate of 28 kilograms per day. However, some days as many as 34 kilograms are used. It takes La Cucina 4 days f the time of order to the time of arrival of the order. Required: 1. Calculate the amount of safety stock kilograms 2. Calculate the reorder point with safety stock. kilograms

Explanation / Answer

1. Safety Stock=(Maximum Daily usage X Maximum Lead time)- (Average daily usage X Average Lead Time)

= (34 KGX 4days)- (28 KGX 4 Days)=24 Kg.

2. Reorder Level= (Average daily usage X Average Lead Time) + Safety Stock

= (28 KGX 4 Days)+ 24 Kg=136 Kg

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