Question

A company uses 2555 units of an item annually. Delivery lead time is 8 days. The reorder point (in number of units) to achieve optimum inventory is

• A. 7
• B. 8
• C. 56
• D. 60

Answer 1

The correct option is C 56

Method I:
Using Wilson Harris model (Deterministic
Model)

R = Consumption Rate = 2555 units annually

Q = Ordered Quantity

T = Cycle Time

t = Lead Time = 8 days $=\frac{8}{365}\text{years}$

x = Reorder Quantity (Point)

Using Geometry of triangle

$R=\frac{Q}{T}=\frac{x}{t}$

$2555=\frac{x}{\left(8/365\right)}$
or x = 56 unit

Therefore, the reorder point to achieve optimum inventory is 56 units.

Method II:

Reorder point,

ROP = Lead time × Demand + Safety stock

= Lt × d + SS

Since, SS = 0

So, ROP = LT × d

Given: LT = 8 days

$d=\frac{2555}{365}=7\text{units/day}$

$\therefore ROL=LT\times d=8\times 7=56\text{units}$