compute the required Reorder Point (ROP).
Β compute the required Reorder Point (ROP).Β
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ROPexample
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Reorder Point with Safety Stock |
| But what if demand isn’t constant? |
| But what if delivery isn’t reliable?? |
| Daily demand (average) |
DD
| = |
|
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|
| units |
/day
Historical Data |
| Standard deviation of Demand = |
units/day
Daily Demand (units) |
Length of each replenishment cycle (
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|
| days |
)
| 80 |
1
2
Length of replenishment cycle (average)
=
RC = |
days
| 85 |
|
|
|
| 12 |
| Standard deviation of Replenishment Cycle = |
days
75 |
11 |
| 70 |
|
| 13 |
| Service level target = |
|
| 95 |
%
78 |
12
| z = |
1.644853627 |
| 83 |
12
When demand is uncertain (always) and replenishment cycle is uncertain (always). |
| 88 |
13
| Reorder Point without Variability = |
units
93 |
12
| + |
95 13
| Safety Stock (to buffer from variability) = |
SS = |
units
94 |
=
|
| 90 |
| Reorder Point (in the real world!) = |
ROP = |
units 83
| (round to the nearest unit) |
90
85
95
80
| Extra: How much more would it cost to increase Safety Stock to reach a 97% Service Level? To reach 99% Service Level? |
ππ=π§
ΰΆ₯
π
2
π·π·
β
π
πΆ
+ π
2
π
πΆ
βπ·π·
2
π
π·π·
=
π
π
πΆ
=
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