Data relating to a particular stores item are as follows:

Average daily usage 400 units

Maximum daily usage 520 units
Minimum daily usage 180 units
Lead time for replenishment of inventory 10 to 15 days
Reorder quantity 8,000 units
What is the reorder level (in units) which avoids stockouts (running out of inventory)?
What is the maximum, average and minimum inventory level?

 Reorder level = maximum usage x maximum lead time=520 x 15 =7,800 units

 Maximum level = reorder level - (minimum usage×minimum lead time) + reorder
quantity= 7,800- (180 x 10) + 8,000= 14,000 units
 Minimum level = (maximum usage× maximum lead time) - (average usage × average
lead time ) = (520 x 15) – (400 x( (10+15)/2)) = 2,800 units
 Average inventory = safety inventory+1/2 reorder quantity = 2,800+(8,000/2)= 6,800
units