Safety Stock and Reorder Point Consider the following data. Inventory Item Average Demand (Annual) Sigma (Std. Dev.) of Demand During Lead Time Item Unit Cost F-11001 Safety Stock and Reorder Point Consider the following data. Inventory Item         Average Demand (Annual)     Sigma (Std. Dev.) of Demand During Lead Time      Item Unit Cost F-11001                            15,000                                                           100                                                            $250.00 K-12002                            100,000                                                         300                                                             $2.00 L-13003                            250,000                                                         200                                                             $0.20 N-14004                          300,000                                                          400                                                             $1.00 P-21001                            50,000                                                            60                                                              $125.00 S-22002                           80,000                                                             75                                                             $30.00 Note: All items are independent demand items. Based on the above data: Calculate the safety stock quantities and the inventory cost associated with safety stock (based on the item unit cost) for the inventory items at four different service levels (50%, 80%, 90%, and 95%). Develop a table to present the inventory quantities and the safety stock costs at each service level. Assuming that demand occurs at a steady pace every month (in other words, there is no seasonality or cyclical change in the level of demand), calculate the reorder point for each item assuming a lead time of two months and a service level of 90%. Develop a table to present the reorder points for all products under these conditions (two month lead time and service level of 90%). Submission Details: Submit your report in a two- to three-page Word document, using APA style. Show more

Safety Stock and Reorder Point

Consider the following data.

Inventory Item         Average Demand (Annual)     Sigma (Std. Dev.) of Demand During Lead Time      Item Unit Cost

F-11001                            15,000                                                           100                                                            $250.00

K-12002                            100,000                                                         300                                                             $2.00

L-13003                            250,000                                                         200                                                             $0.20

N-14004                          300,000                                                          400                                                             $1.00

P-21001                            50,000                                                            60                                                              $125.00

S-22002                           80,000                                                             75                                                             $30.00

Note: All items are independent demand items.

Based on the above data:

  • Calculate the safety stock quantities and the inventory cost associated with safety stock (based on the item unit cost) for the inventory items at four different service levels (50%, 80%, 90%, and 95%).
  • Develop a table to present the inventory quantities and the safety stock costs at each service level.
  • Assuming that demand occurs at a steady pace every month (in other words, there is no seasonality or cyclical change in the level of demand), calculate the reorder point for each item assuming a lead time of two months and a service level of 90%.
  • Develop a table to present the reorder points for all products under these conditions (two month lead time and service level of 90%).

Submission Details:

  • Submit your report in a two- to three-page Word document, using APA style.
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