Question

Suppose we have an EOQ system as follows:
Daily demand = 20 units per day
Reorder point = 100 units.
Order quantity = 300 units per order.
Assume the system operates every day

At the beginning of April 7, the beginning inventory is 140 units.
There is no outstanding order (or scheduled receipt).
What is the ending inventory at the end of April 11?
What is the inventory position at the end of April 11

Answer 1

Assuming that there is no safety stock ,

Lead time for order placement = Reorder point / Daily demand = 100/20 = 5 days

Thus , if there is no outstanding order on 7^th April , we can assume that earliest the order can be placed on 7^th April which will not arrive before 12^th April.

Therefore , there is no addition to stock between period 7^th to 11^th April,17.

Total consumption of stock between BEGINNING 7^th April and END 11^th April ( total 5 days including whole of 7^th April)

= 20 units / day x 5 days

= 100 units

Therefore ,

Inventory position at the end of April 11

= Beginning inventory on 7^th April – Total consumption of stock between beginning 7^th April and 11^th April

= 140 – 5 x 20

= 140 – 100

= 40

INVENTORY POSITION AT THE END OF APRIL 11 = 40