If a store has annual average daily demand of 16 units with a standard deviation of 2 units,and the lead time for it to receive an order from its supplier is 20 days,the store's reorder point for a 95% service level is approximately
A)326.1 units
B)334.8 units
C)348.2 units
D)356.6 units

Question

Quizplus · Accepted Answer

The reorder point formula is given by: Reorder Point = (Average Daily Demand * Lead Time) + (Z-score * Standard Deviation of Demand * sqrt(Lead Time)). For a 95% service level, the Z-score is approximately 1.65. Plugging in the values: Reorder Point = (16 units/day * 20 days) + (1.65 * 2 units * sqrt(20)) = 320 + 14.8 = 334.8 units.

If a Store Has Annual Average Daily Demand of 16