BU395 Study Guide - Midterm Guide: Master Production Schedule, Anxiety, Safety Stock
Document Summary
Reorder point model: is that inventory position which equals on hand + on order back order. Order for this to be true they must have the same time units. Safety stock: stock held in excess of expected demand due to variability of demand or lead- time. This helps reduce the risk of stock out. Can be calculated from the area under the curve number of standard deviations from expected demand. Lead service level: probability that demand will not exceed inventory on hand during lead time, probability of no stock-out during cycle. Stock out risk = 1 lead time service level. Smaller stock out risk the larger the z value. Safety stock is expected demand (0) to rop. Probability of no stock is = lead time service level. Rop = expected demand during lead time + safety stock. Dlt (z score x standard deviation of demand during lead time) Time + safety stock d = average daily demand.
