Question

It is week 1 and there are currently 20 As in stock. We need 300 As at the start of week 5. If there are scheduled receipts planned for week 3 and week 4 of 120 As each and A has a lead time of 2 weeks, when and how large of an order should be placed to meet the requirement of 300 As?

Answer 1

Answer:

An order of 40 As should be placed at the start of Week 3.

Explanation:

In the current situation, the stock level at the end of each week is as follows.

Week 1: 20

Week 2: 20

Week 3: 20 + 120 + 140

Week 4: 140 + 120 = 260

We need 300 As at the start of Week 5 which means that under the current situation, there will be a shortage of 40 As. Hence, we need to order 40 As to make up for the difference.

We are informed that A has a lead time of 2 weeks. This means that we need to order the required 40 As at the start of Week 3 in order to have them in stock by the start of Week 5. If we order any earlier, we shall incur the unnecessary cost of holding extra stock.

Hence, an order of 40 As should be placed at the start of Week 3.