A newspaper publisher uses roughly 890 feet of baling wire each day to secure bu

Question

A newspaper publisher uses roughly 890 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?

A newspaper publisher uses roughly 890 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?

Explanation / Answer

d = Daily demand = 890 ft

L = Lead time = 6 days

Service level = 95%

Stockout risk = 1-0.95 = 0.05

Safety Stock for stockout risk of 0.05 = 1900 ft

Reorder level = Daily demand x Lead time + Safety stock

ROL = 890 x 6 + 1900 = 7240 ft

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