Pam is an authorized distributor of a sport equipment, Tricoflexer. Following ar
ID: 425733 • Letter: P
Question
Pam is an authorized distributor of a sport equipment, Tricoflexer. Following are some of the relevant facts pertaining to her distribution business: 1. Annual demand of Tricoflexer has been stable and predictable, currently at a level of 29158 units. Sales are very steady and regular throughout the year. In fact, you may even assume that she sells exactly the same number of units every day and she doesn't take any day-off. 2. Pam keeps a safety stock of 67 units and the lead-time (i.e. shipping time) is 5 days. Required: Help Pam to decide at what level (i.e. number of units remaining, or, reorder level) she should place an order for replenishment. In your computation, you should not round any numbers. When you present the final answer, please round it to whole number.Explanation / Answer
Given values:
Annual demand, D = 29158 units
Number of working days in a year = 365 days (as she does not take any day-off)
Daily demand, d = Annual demand / Number of working days
Daily demand, d = 29158 / 365
Daily demand, d = 79.885 units
Safety stock, SS = 67 units
Lead time, L = 5 days
Solution:
Reorder point (ROP) is calculated as;
ROP = (Daily demand x Lead time) + Safety stock
Putting the given values in the above formula, we get;
ROP = (79.885 x 5) + 67
ROP = 466.425 or 467 (rounding off to the next whole number)
Reorder point = 467 units
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