Question

A distribution center (DC) in Wisconsin stocks Sony plasma TV sets. The center receives its inventory from a mega warehouse in Kansas with a lead time (L) of 5 days. The DC uses a reorder point (R) of 300 sets and a fixed order quantity (Q) of 250 sets. Current on-hand inventory at the end of Day 1 is 400 sets. There are no scheduled receipts (SR) and no backorders (BO). All demands and receipts occur at the end of the day.

Determine when to order using a Q system

Answer 1

Answer: The order can be placed when the quantity is 1,350 units

Explanation:

Lead time = 5days

Reorder point = 300 set

Fixed order quantity = 250 sets

Current on hand inventory = 400 sets

To determine when to order using a Q system, we use the formula

Reorder level = maximum usage × maximum Lead time + Fixed order quantity

= ( 300 × 5) + 250

= 1,500 + 250

= 1,750

To determine when to order we subtract Reorder level from the current on hand inventory

= 1,750 - 400

= 1,350units