Hi all, good day,
In the previous discussion, we learned about Reorder Point for basic. To make it becomes secure and confidence in company site, we have to add safety stock as the lowest level. This safety stock level is covering uncertainty orders from customer, especially for high order. Also, safety stock used to recover the procurement lead time to supplier with long lead time. Therefore, for finalize in inventory system for ROP, the formula of ROP updated as:
ROP = Safety Stock + Demand * Lead Time
For the minimum level as Safety Stock and for the maximum level as ROP+Safety Stock
Qmax = ROP + Safety Stock
Qopt = ROP
Qmin = Safety Stock
Usually, most of supplier would do replenishment when the stock on hand has reached the ROP or Buyer team would create PO when stock on hand has reached the ROP.
Hoped that the little information can inspire you all.
Thank you and good day
Created by: Eka Angga Riandhika