Re-order levels

This topic has 1 reply, 2 voices, and was last updated 11 years ago by John Moffat.

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April 1, 2015 at 12:20 pm #239801
Lusy
Member
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Annual demand of raw material units is 240,000. If a year has 360 days in total and order takes 35 days to reach from supplier to the manufacturer then:
What is the optimum re-order level of raw material units?

Is the solution of this problem the following?

Re-order level = 240,000*35=8,400,000

Thanks in advance!
April 1, 2015 at 2:55 pm #239822
John Moffat
Keymaster
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I think you were trying to do it the right way, but you have made a very silly mistake!!

The reorder level needs to be enough to last 35 days.

However the demand per day is 240,000/360 !!

(Your reorder level is enough to last for 35 years!!!!!)
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