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ROP_SAFE-solution

ROP_SAFE-solution - SAFETY STOCK SERVICE LEVEL REORDER...

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SAFETY STOCK, SERVICE LEVEL, & REORDER POINT HOMEWORK EXERCISE You are a distributor of steel cables that are used in many different kinds of construction applications. You stock this product in reels of either 2,000 feet or 5,000 feet. 1. Your demand for the 5,000-foot reels is 1,000 reels per month. The standard deviation of demand is 200 reels per month. Reorder lead-time is 6 weeks. How much safety stock do you need to achieve a service level of 90%? 314 5 . 1 ) 200 ( 28 . 1 = (NOTE: remember to convert the lead time to match time unit of the forecast; in this case, the lead time in weeks is converted to months. To keep the conversion simple, I assume a four-week month.) 2. What is the reorder point for this level of service? 1814 314 ) 5 . 1 ( 1000 = + = R (where the 314 is the safety stock that comes from “1”) 3. You are able to locate a new supplier who can deliver in 3 weeks. What would your reorder point be with a 3-week lead-time for a 90% service level? 972 75 . 0 ) 200 ( 28 . 1 ) 75 (. 1000 = + = R (note that both parts of the formula change with the change in lead time.) 4. Assume that your lead-time continues at 6 weeks as in "1" and "2" above.
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