ENTREPRENEURIAL OPERATIONS
INVENTORY MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A supplier maintains a 21-day lead time for delivery of their products. The customer maintains an inventory with a safety stock of 350 units based on a usage of 425 per week. Calculate the order point (1 week = 7 days).
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1, 475 units
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1, 625 units
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9, 275 units
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1, 275 units
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Explanation:
Detailed explanation-1: -The safety stock to be maintained by the sales and distribution division for a service level of 95% is 1, 446 units. Reorder Point: The reorder point for toffee inc is 4, 313 units. This is calculated by adding the average demand (1, 867 units) to the safety stock (1, 446 units).
Detailed explanation-2: -The reorder point formula is lead time demand + safety stock. Of course, you must figure out what your lead time demand and safety stock numbers are to determine an accurate calculation.
Detailed explanation-3: -To calculate a reorder point with safety stock, multiply the daily average usage by the lead time and add the amount of safety stock you keep.
There is 1 question to complete.