Given the following information about a firms stock levels, what is the reorder level of stocks?-Buffer stock is 100-Lead time is 3 weeks-Stock is used at the rate of 80 units per week-Stock deliveries are 500 units a time

INVENTORY MANAGEMENT

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

Given the following information about a firm’s stock levels, what is the reorder level of stocks?-Buffer stock is 100-Lead time is 3 weeks-Stock is used at the rate of 80 units per week-Stock deliveries are 500 units a time

A	180
B	340
C	500
D	580

Explanation:

Detailed explanation-1: -Reorder point = total lead time demand + safety stock You’ll need to understand how to calculate your lead time demand and safety stock before using ROP, which, thankfully, is also fairly simple.

Detailed explanation-2: -Another method of calculating reorder level involves the calculation of usage rate per day, lead time which is the amount of time between placing an order and receiving the goods and the safety stock level expressed in terms of several days’ sales. Reorder level = Average daily usage rate × lead-time in days .

Detailed explanation-3: -The reorder point formula is daily unit sales multiplied by delivery lead time, with some safety stock for good measure.

Detailed explanation-4: -Calculating Reorder Level – Reorder Level Formula 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.

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BUISENESS MANAGEMENT

INVENTORY MANAGEMENT