For a given item the lead time is 1 week, the on hand inventory is 50 units, demand is 20 units per week, safety stock is set at 3 weeks supply and the item is ordered every 2 weeks. The order quantity should be:
A) 70 units
B) 60 units
C) 50 units
D) 40 units
E) 120 units

Question

Quizplus · Accepted Answer

The order quantity should cover the demand during the lead time, the demand during the reorder period, and maintain the safety stock. Lead time demand = 20 units (1 week), reorder period demand = 40 units (2 weeks), and safety stock = 60 units (3 weeks * 20 units/week). Total = 20 + 40 + 60 = 120 units. Since the on-hand inventory is 50 units, the order quantity should be 120 - 50 = 70 units.

For a Given Item the Lead Time Is 1 Week