Evaluate the statistical ROP when you have probabilistic demand and constant lead time,with constant demand and probabilistic lead time, and with demand and lead time bothprobabilistic. The Statistical Reorder Point (ROP)The reorder point (ROP) is commonly known as the minimum inventory or stock level for a specificproduct that triggers the reordering of more inventory when it is reached by considering the lead time itwill take to replenish inventory to ensure inventory levels do not reach zero. By setting accurate reorderpoints, organisations can avoid having products out of stock while waiting for new inventory.Globelink Cargo stocks a crucial part that has a normally distributed demand pattern during the reorderpoint. Past demand shows that the average demand during lead time (u) for the part is 550 units, andthe standard deviation of demand during lead time (ALT) is 40 units. The supply chain manager wantsto determine the safety stock and statistical reorder point that result in 5% stockouts or a service levelof 95%. Alternatively, the manager wants to know the additional safety stock required to attain a 99%service level.

While calculating ROP, the uncertainty of demand is considered as an important factor. It impacts…

Answered: Evaluate the statistical ROP when you…

Evaluate the statistical ROP when you have probabilistic demand and constant lead time, with constant demand and probabilistic lead time, and with demand and lead time both probabilistic.

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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