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An airline has determined that 10 spare brake cylinders will give them stock out risk of 30%, whereas 14 will reduce the risk to 15% and 16 to 10%. It takes 3 months to receive items from supplier and the airline has an average of 4 cylinders per month. At what stock level should they reorder assuming that they wish to maintain 85% service level?

An airline has determined that 10 spare brake cylinders will give them stock out risk of 30%, whereas 14 will reduce the risk to 15% and 16 to 10%. It takes 3 months to receive items from supplier and the airline has an average of 4 cylinders per month. At what stock level should they reorder assuming that they wish to maintain 85% service level? Correct Answer 26 items

Explanation:

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Lead Time:

  • The time gap between the placing of an order and its actual arrival in the inventory is known as lead time.

Calculation:

Lead time demand = 3 × 4 = 12 items

Safety Stock level should they reorder assuming that they wish to maintain 85% service level = 15% disservice it means 15% stock is out of risk

It is given that, 14 items will reduce the risk to 15% 

Therefore, Reorder level = 12 + 14 = 26 items.

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