## Related questions with answers

A furniture company uses $13,200$ corrugated boxes in $22$ working days. It takes $2$ days' lead time to get more boxes. Safety stock is $900$ boxes. a. How many boxes are used daily? b. What is the reorder point?

Solution

VerifiedWhen the inventory level falls to such a level, where it needs to be replenished, such a level or point is known as reorder point. There are three variables that are required to be known in order to ascertain the reorder point. There is the number of units sold per day that is, daily sales, the number of days that will be taken for the stock to reach the office that is, lead time and a kind of a buffer that corporations keep so that there is no 'zero stock' situation, this is known as safety stock.

Thus,

$\text{Reorder point}=\text{(Daily sales} \cdot{\text{Lead time})+{\text{Safety stock}}}$

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