A wholesaler uses a reorder point of 70 units. Its order lead time is 5 days, it holds no safety stock, and sells an average of 10 units per day. As long as an order is received within 6 days after it is placed, the firm will not run out of stock providing its usage rate is equal to or less than 10 units per day.

Question

Quizplus · Accepted Answer

Given the reorder point of 70 units and an average daily sale of 10 units, the wholesaler has a 7-day supply of inventory. Since the order lead time is 5 days and they sell 10 units per day, an order placed when inventory reaches 70 units will arrive before they run out of stock, even if the delivery takes up to 6 days.

A Wholesaler Uses a Reorder Point of 70 Units