ENTREPRENEURIAL OPERATIONS
INVENTORY MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The number of unit order each time
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The number of unit order in maximum quantity
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Either A or B
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None of the above
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Detailed explanation-1: -To calculate your reorder level, multiply your average daily usage rate by the lead time in days for an inventory item. Suppose, Mamaearth experiences an average daily usage of its Vitamin C Hand Cream of 10000 units, and the lead time for producing new units is 5 days.
Detailed explanation-2: -The reorder point (ROP) is the minimum number of units that a business needs to have in stock to prevent stock outs and ensure order fulfillment. Once inventory levels reach the reorder point, this triggers the replenishment process to reorder that item.
Detailed explanation-3: -Also referred to as ‘optimum lot size, ‘ the economic order quantity, or EOQ, is a calculation designed to find the optimal order quantity for businesses to minimize logistics costs, warehousing space, stockouts, and overstock costs. The formula is: EOQ = square root of: [2(setup costs)(demand rate)] / holding costs.