Demand for dishwasher water pumps is 8 per day. The standard deviation of demand is 3 per day, and the order lead time is four days. The service level is 95%. What should the reorder point be?

41.9 units

Explanation:

Reorder point can be defined as the level of inventory which help to triggers an action to replace that particular inventory stock in such a way that when the stock level reduced the item must be reordered because it is the minimum unit quantity that a business owner or an organisation should always have in available inventory before they need to reorder more product.

Using this formula

Reorder point= Demand during the lead time + Z for customer service level * standard deviation * Square root of lead time multiplier.

Where,

Demand during the lead time =(8*4)

Z for customer service level =1.65

Standard deviation =3

Square root of lead time multiplier=4

Let plug in the formula

Reorder point=(8*4) + 1.65*3* square root of(4)

= 41.9 units.

Therefore the Reorder point is 41.9 units

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