Wednesday, March 13, 2013

Decision for Reorder Point 2

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