Using the data in TABLE 4 and 5 tables calculate the: 1) reorder point, and 2) t

Question

Using the data in TABLE 4 and 5 tables calculate the: 1) reorder point, and 2) the release date of the purchase requisition. Use the formulas and tables found in the lecture slides. Show your calculations.

RLT=

W=RLT/DEMAND PERIOD

DDLT= W X DEMAND DURING PERIOD=

SS=(R=2.06)(?W)(MAD)

ROP=DDLT+SS

TABLE 4 Good Desired Service Planned Delivery Time Purchasing Receipt Processing Processing Time Requirement Forecast Period Last Forecast Level Work Days Date Monday- Friday Time Last Friday in October 95% 5 Days 3 Days 1 Day 5 days 35 TABLE 5 Time Period Last Last -1 Last -2 Last -3 Forecast 140 144 144 135 Actual 136 140 142 137 Error 4 4

Explanation / Answer

RLT = Replenishment lead time = simple addition of all the lead times = 5 + 3 + 1=9 days

W = RLT/Demand period ( Here demand period is 5 as forecast period is 5 days)= 9/5 = 1.8

Average demand is given 35 per day

So demand during lead time = 9*35= 315 units (9 days demand )

To calculate MAD(mean absolute Deviation) = Just take average of absolute errors = average(4,4,2,2)= 3

Safety stock (As per the formula given) = 2.06* Sqrt(W) * MAD = 8.29 = 9 units

Reorder point = Demand durinng lead time + Safety stock = 315+ 9 = 324 units

i.e. when order level reaches 324 units we should make one order

To calculate release date for the purchase requisition you can see the data given about date i.e. starting date and all for the period Its not mentioned here

Thanks

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