A newspaper publisher uses roughly 860 feet of baling wire each day to secure bu

Question

A newspaper publisher uses roughly 860 feet of baling wire each day to secure bundles of newspapers while they are being distributed to carriers. The paper is published Monday through Saturday. Lead time is six workdays. What is the appropriate reorder point quantity, given that the company desires a service level of 95 percent, if that stockout risk for various levels of safety stock is as follows: 1,500 feet, .10; 1,900 feet, 05; 2,100 feet, .02; and 2,400 feet, .01? Appropriate reorder point ft

Explanation / Answer

redorder point = demand during lead time + safety stock

demand during lead time = d*L

d = demand per day = 860

L = lead time = 6 days

demand during lead time = 860*6 = 5160

safety stock at 95% servicel level means 5% risk of stockout.

from the given levels of safety stock, 5% risk corresponds to 1900 feet with 0.05.

Hence safety stock = 1900

reorder point = 5160 + 1900 = 7060

Appropriate reorder point = 7060

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