Kyle Bits and Bytes Kyle Bits and Bytes, a retailer of computing products sells a variety of computer-related products. One of Kyle's most popular products is an HP laser printer. The average weekly demand is 200 units. Lead time (lead time is defined as the amount of time between when the order is placed and when it is delivered) for a new order from the manufacturer to arrive is one week. If the demand for printers were constant, the retailer would reorder when there were exactly 200 printers in inventory. However, Kyle learned demand is a random variable in his Operations Management class. An analysis of previous weeks reveals the weekly demand standard deviation is 30. Kyle knows if a customer wants to buy an HP laser printer but he has none available, he will lose that sale, plus possibly additional sales. He wants the probability of running short (stock-out) in any week to be no more than 6%. Expansion Strategy and Establishing a Re-Order Point Write a 500-word Include answers to the following: Case 2: Kyle Bits and Bytes What should be the re-order point? How many HP laser printers should he have in stock when he reorders from the manufacturer? Running head: Reorder point NAME: UNIVERSITY: Running head: Reorder point Using the figures as given for weekly demand Average weekly demand= ma= 200 weekly standard deviation = 30 Need no more than 6% uncertainty===> 94% probability of success==> Z= 1.88 for one tail Lead time is one week. During that time demand is assumed as 200 also. Reorder point is mean demand during lead-time+ Z*standard deviation= 200 + 1.88*30=256.4 ==> 257 units The safety stock is Z(.94)*standard deviation=1.88*30= 56.4, so 57 to be safe. If uncertainty is 5%, use Z=1.96 in above. The reorder point formulation and calculating security stock How little is inadequate? That's just what your Reorder Point can help you determine. Let's speak about the idea of reorder points, protection stock, and exactly how to place those numbers collectively to ensure you possess the right amount of stock on-hand. When you begin your business off you're probably making purchases predicated on your gut instinct and the available capital readily available. Basically, you're looking to buy enough to stock to keep your racks and returning room full, and then looking to get sell out of this stock before you take into account re-ordering. However, as you get a couple of months into the business as well as your background of purchase and sales requests grows, an improved, smarter way of re-ordering can be accessible to you. This is actually the Reordering Point. How do I analyze my reorder point? Running head: Reorder point The thing to learn in regards to a reorder point is that it is not really a static amount. It's predicated on your own purchase and sales cycles, and it can vary on the per-product basis. However, when you have a cope with on habits in your purchase and sales purchases for a specific product, you're ready to get started on putting the factors together. The reorder point formulation is: Reorder point solution equals wide open parentheses average daily product sales time's delivery lead time close parentheses plus safe practices stock Determining average daily device sales Take the circumstance of Archon Optical and their Ghost eyeglasses. Listed below are the sales of the Ghost during the last 90 days: Desk of Average Daily product sales for ghost eyeglasses. January Sales: 65, Feb Sales: 72, March Sales: 53 If we total those amounts, we get 190 total products sold within the last 90 days. This means that the daily sales for the Ghost are 2.11 each day. Determining average delivery business lead time Average delivery business lead time is merely the quantity of time it often takes for your shipments of a specific product to reach. You'll want to truly have a handful of purchase requests on-hand to check on the numbers because of this, as the delivery times may differ based on the number you order, as well as when you order it. There are many various ways to compute Running head: Reorder point this, but averaging things out within the last couple of months can help provide some framework. Regarding Archon Optical, here are some purchase orders going back three month of Ghost shipments: 15 days and nights total delivery time / 3 purchases total = 5 times lead time typically In the event that you add the full total delivery time (15 days and nights) and split it by the amount of orders (3 requests), then that's the average lead time of five days and nights for the merchandise to arrive. Determining how much security stock to continue hand Safety stock is merely the minimum number on-hand number that your business can tolerate. The thought of safety stock is comparable to the thought of a reorder point, which is the stock amount of which you will create a fresh purchase order for the product. A reorder point could possibly be the identical to your safe practices stock amount, but it is almost always just a little higher to element in the lead time. An excellent reorder point means that your business never dips below your basic safety stock level, but a good basic safety stock level means that your number never visits zero while people still need it that product. Running head: Reorder point Some numbers you will want to take into consideration as you select a safeness stock level are: average daily sales and the daily average that product found in work purchases (if appropriate). At Archon Optical, the safeness stock is dependent on the thought of having enough stock for 14 days of sales. Because the average daily sales for the Ghost are 2.11 (as determined earlier on this site), which means the safeness stock for Ghost is approximately 30 (if you gather). Putting the statistics together Now that we have every one of the Archon Optical statistics down, we're prepared to come up with a reorder point for the Ghost. Which means that, once the volume on-hand for the Ghost eyeglasses hits approximately 43 or 44, individuals at Archon Optical know to set up another purchase order to get more of the merchandise? Because they've built the average delivery business lead time in to the reorder point, the excess Ghost eyeglasses should turn up before Archon ever before dips below the quantity of safety stock. However, even if there are development shortages or delays in delivery, the safeness stock that Archon Optical has set up means they can continue steadily to sell the Ghost for 14 days before they go out of stock. Setting up computerized reminders for reorder points Running head: Reorder point Reorder things are extremely powerful for maintaining your business running well, but they're no use for you unless you action them regularly. If you are a spreadsheet individual, you may use conditional formatting for the number value of specific skin cells. It's somewhat of work to create because you need to arrange it for every specific cell, nevertheless, you can established Excel up so that skin cells turn red as soon as they drop below your reorder point, that will warn you if you want to start out on a fresh purchase order. However, things can get even easier if all your inventory and buy orders are stored in the same software. Inflow Inventory can observe the reorder point and a good reorder amount for you, and it places every one of the products that require to be re-ordered using one display screen, for easy browsing. Inflow can also store your supplier information, which means you can begin new purchase purchases without ever departing the application. References REORDER POINT SYSTEM. (n.d.). SpringerReference. doi:10.1007/springerreference_7153 REORDER POINT. (n.d.). Encyclopedia of Production and Manufacturing Management, 640640. doi:10.1007/1-4020-0612-8_813 REORDER POINT. (n.d.). SpringerReference. doi:10.1007/springerreference_7152 Running head: Reorder point Running head: Reorder point NAME: UNIVERSITY: Running head: Reorder point Using the figures as given for weekly demand Average weekly demand= ma= 200 weekly standard deviation = 30 Need no more than 6% uncertainty===> 94% probability of success==> Z= 1.88 for one tail Lead time is one week. During that time demand is assumed as 200 also. Reorder point is mean demand during lead-time+ Z*standard deviation= 200 + 1.88*30=256.4 ==> 257 units The safety stock is Z(.94)*standard deviation=1.88*30= 56.4, so 57 to be safe. If uncertainty is 5%, use Z=1.96 in above. The reorder point formulation and calculating security stock How little is inadequate? That's just what your Reorder Point can help you determine. Let's speak about the idea of reorder points, protection stock, and exactly how to place those numbers collectively to ensure you possess the right amount of stock on-hand. When you begin your business off you're probably making purchases predicated on your gut instinct and the available capital readily available. Basically, you're looking to buy enough to stock to keep your racks and returning room full, and then looking to get sell out of this stock before you take into account re-ordering. However, as you get a couple of months into the business as well as your background of purchase and sales requests grows, an improved, smarter way of re-ordering can be accessible to you. This is actually the Reordering Point. How do I analyze my reorder point? Running head: Reorder point The thing to learn in regards to a reorder point is that it is not really a static amount. It's predicated on your own purchase and sales cycles, and it can vary on the per-product basis. However, when you have a cope with on habits in your purchase and sales purchases for a specific product, you're ready to get started on putting the factors together. The reorder point formulation is: Reorder point solution equals wide open parentheses average daily product sales time's delivery lead time close parentheses plus safe practices stock Determining average daily device sales Take the circumstance of Archon Optical and their Ghost eyeglasses. Listed below are the sales of the Ghost during the last 90 days: Desk of Average Daily product sales for ghost eyeglasses. January Sales: 65, Feb Sales: 72, March Sales: 53 If we total those amounts, we get 190 total products sold within the last 90 days. This means that the daily sales for the Ghost are 2.11 each day. Determining average delivery business lead time Average delivery business lead time is merely the quantity of time it often takes for your shipments of a specific product to reach. You'll want to truly have a handful of purchase requests on-hand to check on the numbers because of this, as the delivery times may differ based on the number you order, as well as when you order it. There are many various ways to compute Running head: Reorder point this, but averaging things out within the last couple of months can help provide some framework. Regarding Archon Optical, here are some purchase orders going back three month of Ghost shipments: 15 days and nights total delivery time / 3 purchases total = 5 times lead time typically In the event that you add the full total delivery time (15 days and nights) and split it by the amount of orders (3 requests), then that's the average lead time of five days and nights for the merchandise to arrive. Determining how much security stock to continue hand Safety stock is merely the minimum number on-hand number that your business can tolerate. The thought of safety stock is comparable to the thought of a reorder point, which is the stock amount of which you will create a fresh purchase order for the product. A reorder point could possibly be the identical to your safe practices stock amount, but it is almost always just a little higher to element in the lead time. An excellent reorder point means that your business never dips below your basic safety stock level, but a good basic safety stock level means that your number never visits zero while people still need it that product. Running head: Reorder point Some numbers you will want to take into consideration as you select a safeness stock level are: average daily sales and the daily average that product found in work purchases (if appropriate). At Archon Optical, the safeness stock is dependent on the thought of having enough stock for 14 days of sales. Because the average daily sales for the Ghost are 2.11 (as determined earlier on this site), which means the safeness stock for Ghost is approximately 30 (if you gather). Putting the statistics together Now that we have every one of the Archon Optical statistics down, we're prepared to come up with a reorder point for the Ghost. Which means that, once the volume on-hand for the Ghost eyeglasses hits approximately 43 or 44, individuals at Archon Optical know to set up another purchase order to get more of the merchandise? Because they've built the average delivery business lead time in to the reorder point, the excess Ghost eyeglasses should turn up before Archon ever before dips below the quantity of safety stock. However, even if there are development shortages or delays in delivery, the safeness stock that Archon Optical has set up means they can continue steadily to sell the Ghost for 14 days before they go out of stock. Setting up computerized reminders for reorder points Running head: Reorder point Reorder things are extremely powerful for maintaining your business running well, but they're no use for you unless you action them regularly. If you are a spreadsheet individual, you may use conditional formatting for the number value of specific skin cells. It's somewhat of work to create because you need to arrange it for every specific cell, nevertheless, you can established Excel up so that skin cells turn red as soon as they drop below your reorder point, that will warn you if you want to start out on a fresh purchase order. However, things can get even easier if all your inventory and buy orders are stored in the same software. Inflow Inventory can observe the reorder point and a good reorder amount for you, and it places every one of the products that require to be re-ordered using one display screen, for easy browsing. Inflow can also store your supplier information, which means you can begin new purchase purchases without ever departing the application. References REORDER POINT SYSTEM. (n.d.). SpringerReference. doi:10.1007/springerreference_7153 REORDER POINT. (n.d.). Encyclopedia of Production and Manufacturing Management, 640640. doi:10.1007/1-4020-0612-8_813 REORDER POINT. (n.d.). SpringerReference. doi:10.1007/springerreference_7152 Running head: Reorder point