Page 478 - FM Integrated WorkBook STUDENT 2018-19

Chapter 21

Question 5

Re-order level

Using the data from the previous question, assume that the company adopts an
order level of 20,000 units and that the lead time from the supplier is four
weeks.

What is the reorder level?

How frequently (in weeks) will an order be made?

Demand in one week = 200,000/52 = 3,846 units.

Demand in the lead time = 3,846 × 4 = 15,384 units = re-order level.

Orders per year = 200,000/20,000 = 10

52/10 = 5.2

Orders will be made every 5.2 weeks.

Question 6

Re-order level

A company has demand per year for a product of 66,000 units and the supplier
has a lead time of 2 months.

The company wishes to keep a buffer inventory of 2,000 units.

Calculate the re-order level.

When there is a buffer inventory:

Re-order level = demand in lead time + buffer.

66,000/12 × 2 + 2,000 = 13,000 units.

468