The Statistical Reorder Point (ROP) The reorder point (ROP) is commonly known as the minimum inventory or stock level for a specific product that triggers the reordering of more inventory when it is reached by considering the lead time it will take to replenish inventory to ensure inventory levels do not reach zero. By setting accurate reorder points, 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 reorder point. Past demand shows that the average demand during lead time () for the part is 550 units, and the standard deviation of demand during lead time ( dLT) is 40 units. The supply chain manager wants to determine the safety stock and statistical reorder point that result in 5% stockouts or a service level of 95%. Alternatively, the manager wants to know the additional safety stock required to attain a 99% service level.

Question 5

5.1 You are to evaluate the Z-value of a 95% service level and use the value to analyse and determine the required safety stock.

5.2 Based on the scenario information, calculate the ROP, and present your findings

5.3 Should the required safety stock be a 99% service level, calculate the additional safety stock required.

5.4 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.