At the grocery store, you buy a pack of 18 eggs and decide that when you get down to only 6 eggs you will buy another 18. In this scenario, what is your re order point? In this situation, what is your order quantity ?
To determine the reorder point and order quantity, we need to understand the concept of inventory management and consider the given scenario.
The reorder point is the inventory level at which a new order should be placed to replenish stock in order to avoid stockouts or shortages. In this case, the reorder point is when you have only 6 eggs left.
To calculate the order quantity, we need to know the desired ending inventory level. However, this information is not provided in the given scenario. The order quantity is typically determined based on factors such as lead time, demand, and cost considerations.
However, we can make an assumption here. Let's assume the desired ending inventory level is also 18 eggs, which means you always want to have 18 eggs in stock.
Now, to calculate the order quantity, we can subtract the desired ending inventory level from the reorder point:
Order Quantity = Reorder Point - Desired Ending Inventory
In this case, the reorder point is 6 eggs (the point at which you plan to order), and the desired ending inventory is 18 eggs. Plug these values into the formula:
Order Quantity = 6 eggs - 18 eggs = -12 eggs
Since the result is negative, it suggests that you do not need to place an order since you already have more than the desired ending inventory level. However, to maintain consistency, you can assume a minimum order quantity of zero in this case.
Therefore, the reorder point is 6 eggs (when you have only 6 eggs left), and the order quantity is 0 (since you already have enough stock).