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Inventory Modeling: Reorder Point Calculation

This document discusses determining a reorder point for inventory modeling. It provides an example where the lead time is 8 working days, the company operates 260 days per year, and the desired safety stock is 13. Using the formula reorder point = lead time x demand + safety stock, with lead time and demand in the same time units, the reorder point is calculated as 192 + 13 = 205. The document also notes that in the short term, demand may follow a normal distribution with a weekly mean and variance, and demand over multiple weeks would have a higher mean and variance.

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Moner Manush
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2 views3 pages

Inventory Modeling: Reorder Point Calculation

This document discusses determining a reorder point for inventory modeling. It provides an example where the lead time is 8 working days, the company operates 260 days per year, and the desired safety stock is 13. Using the formula reorder point = lead time x demand + safety stock, with lead time and demand in the same time units, the reorder point is calculated as 192 + 13 = 205. The document also notes that in the short term, demand may follow a normal distribution with a weekly mean and variance, and demand over multiple weeks would have a higher mean and variance.

Uploaded by

Moner Manush
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd

INVENTORY MODELING

Service Levels

DETERMINING A REORDER
POINT, r* (With Safety Stock)
Suppose lead time is 8 working days
The company operates 260 days per year
Suppose a safety stock of SS = 13 is desired
Reorder Point
r* = LD + SS
Where L and D are in same time units

L = 8/260 .0308 yrs D = 6240 /year


r* = .0308(6240) +13 192 +13 = 205

Actual Demand Distribution


Suppose on a short term basis demand
actually more closely follows a normal
distribution with:
Weekly mean demand = W
Weekly variance = 2W, Weekly Std dev. = W

Demand over an n-week period:


normal
Mean nW
_
Variance = n2W, Std Dev. = (n) W

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