A newspaper publisher uses roughly 820 feet of baling wire each day to secure bu

Question

A newspaper publisher uses roughly 820 feet of baling wire each day to secure bundles of newspapers while they are being distributed to carriers. The paper is published Monday through Saturday. Lead time is six workdays. What is the appropriate reorder point quantity, given that the company desires a service level of 95 percent, if that stockout risk for various levels of safety stock is as follows: 1,500 feet, .10; 1,700 feet, .05; 2,100 feet, .02; and 2,400 feet, .01?

A newspaper publisher uses roughly 820 feet of baling wire each day to secure bundles of newspapers while they are being distributed to carriers. The paper is published Monday through Saturday. Lead time is six workdays. What is the appropriate reorder point quantity, given that the company desires a service level of 95 percent, if that stockout risk for various levels of safety stock is as follows: 1,500 feet, .10; 1,700 feet, .05; 2,100 feet, .02; and 2,400 feet, .01?

Explanation / Answer

Service level = 95 % => Stockout risk = 1-0.95 = 0.05

Safety stock at 0.05 risk = 2100 feet.

Appropriate Reorder point = Average Demand during Lead Time + Safety Stock

ROP = d*L+SS = (820*6)+2100 = 7020 ft

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.