My max formula is ROL+ EOQ(minimum usage*minimum lead time

Business/Management

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Answer

Maximum Stock Level=24 193 units\text{Maximum Stock Level} = 24\,193 \text{ units}

Step-by-step solution

3 steps

The formula you provided, ROL + EOQ(minimum usage*minimum lead time), is not a standard formula for calculating the maximum stock level. As written, it implies multiplying EOQ by the product of minimum usage and minimum lead time, which would lead to an incorrect result.

A common and more accurate formula for the maximum stock level is:

Maximum Stock Level=Reorder Level (ROL)+Economic Order Quantity (EOQ)−(Minimum Usage×Minimum Lead Time)\text{Maximum Stock Level} = \text{Reorder Level (ROL)} + \text{Economic Order Quantity (EOQ)} - (\text{Minimum Usage} \times \text{Minimum Lead Time})

Let's use this corrected formula with the available data.

From previous calculations:

  • Reorder Level (ROL) = 54,808 units
  • Economic Order Quantity (EOQ) = 4,000 units
  • Average Weekly Demand = 11,538.46 units/week
  • Minimum Lead Time = 3 weeks

  1. Identify missing information and make an assumption.

    The problem does not provide a specific "minimum usage" value. For this calculation, we will assume "minimum usage" is equal to the "average weekly demand" calculated previously.

    Minimum Usage≈11 538.46 units/week\text{Minimum Usage} \approx 11\,538.46 \text{ units/week}

  2. Calculate the Minimum Consumption during Minimum Lead Time.

    Min Consumption during Min Lead Time=Minimum Usage×Minimum Lead Time\text{Min Consumption during Min Lead Time} = \text{Minimum Usage} \times \text{Minimum Lead Time} Min Consumption during Min Lead Time=11 538.46 units/week×3 weeks≈34 615.38 units\text{Min Consumption during Min Lead Time} = 11\,538.46 \text{ units/week} \times 3 \text{ weeks} \approx 34\,615.38 \text{ units}

  3. Apply the corrected Maximum Stock Level formula.

    Maximum Stock Level=ROL+EOQ−(Min Consumption during Min Lead Time)\text{Maximum Stock Level} = \text{ROL} + \text{EOQ} - (\text{Min Consumption during Min Lead Time}) Maximum Stock Level=54 808 units+4 000 units−34 615.38 units\text{Maximum Stock Level} = 54\,808 \text{ units} + 4\,000 \text{ units} - 34\,615.38 \text{ units} Maximum Stock Level=58 808 units−34 615.38 units\text{Maximum Stock Level} = 58\,808 \text{ units} - 34\,615.38 \text{ units} Maximum Stock Level=24 192.62 units\text{Maximum Stock Level} = 24\,192.62 \text{ units}

    Rounding to the nearest whole unit, the maximum stock level is 24,193 units.

    Maximum Stock Level=24 193 units\text{Maximum Stock Level} = 24\,193 \text{ units}

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