Given the data below, what would be the new reorder point (ROP) if the lead time were reduced by 20%?
Daily demand = 20 units -
Reorder lead time = 10 days -
Safety stock = 15 units
Given the data below, what would be the new reorder point (ROP) if the lead time were reduced by 20%?
Daily demand = 20 units -
Reorder lead time = 10 days -
Safety stock = 15 units
The reorder point (ROP) is calculated using the formula: ROP = (Daily demand × Lead time) + Safety stock. Initially, the lead time is 10 days. If the lead time is reduced by 20%, the new lead time becomes 8 days (10 * 0.8). Given a daily demand of 20 units, the demand over 8 days would be 160 units (20 * 8). Adding the safety stock of 15 units results in a total of 175 units for the new ROP.
=20*8+15=175