CPIM Practice Exam

Given an economic order quantity of 500 units, and a demand of 100 units per week, what is the order point for a lead time of 3 weeks and safety stock of 80 units?

1. 240 units

2. 300 units

3. 380 units

4. 500 units

The correct answer is: 380 units

To determine the order point, you need to consider both the demand during the lead time and the safety stock. The order point essentially represents the inventory level at which a new order must be placed to avoid stockouts. First, calculate the demand for the lead time. Since the demand is 100 units per week and the lead time is 3 weeks, the total demand during the lead time is: 100 units/week × 3 weeks = 300 units Next, we need to add the safety stock to this amount. Safety stock acts as a buffer against variability in demand or lead time. In this case, the safety stock is given as 80 units. Now, combine the demand during the lead time with the safety stock: 300 units (demand during lead time) + 80 units (safety stock) = 380 units This total represents the order point. When the inventory level reaches 380 units, a new order should be placed to ensure continuous supply without running into stockouts, factoring in both expected demand and any uncertainties covered by safety stock.