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Chapter 20

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.

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