A newspaper publisher uses roughly 980 feet of baling wire each day to secure bu
ID: 379290 • Letter: A
Question
A newspaper publisher uses roughly 980 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 6 workdays. What is the appropriate reorder point quantity, given that the company desires a service level of 99 percent, if that stockout risk for various levels of safety stock is as follows: 1,500 feet, .10; 1,900 feet, .05; 2,300 feet, .02; and 2,700 feet, .01?
Appropriate reorder point ft
Explanation / Answer
Service level when expressed in fraction = ( 1 - Stockout risk)
Hence For service level = 99 %
Stockut risk - 1 - Service level / 100 = 1 - 99/100 = 0.01
It is given that safety stock level for stockout risk = 0.01
Therefore , Safety stock requirement for service level of 99 ercent = 2700 feet
Also are given:
Daily publication of newspaper = 980 ft
Lead time = 6 working days
Hence,
Reorder point = Daily publication number x Lead time + Safety stock
= 980 x 6 + 2700
= 5880 + 2700
= 8580
REORDER POINT = 8580 feet
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