18 Jun W2A2-And Attachments
Safety Stock and Reorder Point
Consider the following data.
Inventory Item
Average Demand (Annual)
Sigma (Std. Dev.) of Demand During Lead Time
Item Unit Cost
F-11001
15,000
100
$250.00
K-12002
100,000
300
$2.00
L-13003
250,000
200
$0.20
N-14004
300,000
400
$1.00
P-21001
50,000
60
$125.00
S-22002
80,000
75
$30.00
Note: All items are independent demand items.
Based on the above data:
Calculate the safety stock quantities and the inventory cost associated with safety stock (based on the item unit cost) for the inventory items at four different service levels (50%, 80%, 90%, and 95%).
Develop a table to present the inventory quantities and the safety stock costs at each service level.
Assuming that demand occurs at a steady pace every month (in other words, there is no seasonality or cyclical change in the level of demand), calculate the reorder point for each item assuming a lead time of two months and a service level of 90%.
Develop a table to present the reorder points for all products under these conditions (two month lead time and service level of 90%).
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