Question

If
Emergency order point = 3 months
Review Period = quarterly
Average monthly consumption = 500 units / month
Max stock quantity = 600 units
On month end, Stock on hand = 300 units
Order = Max stock quantity – Stock on hand
Order quantity= 300 units
Suppose a basic health facility is operating in newyork city. Being storekeeper, calculate Facility Max level?
I need to find facility max level not inventory max level

or simply guide me how to find Facility max level with any other example

Answer 1

THERE ARE SOME ERRORS IN YOUR QUESTION , I AM PROVIDING WITH MY EXAMPLE

Fixation of Stock Levels: Formulas and Calculations

Formulas:

(i) Maximum Level of Stock = (Reorder Level + Reorder Quantity) – (Minimum rate of consumption x Minimum reorder period)

Maximum Level may be alternatively fixed as Safety Stock + Reorder Quantity or EOQ.

(ii) Minimum level of stock = Reorder level – (Average rate of consumption x Average reorder period)

(iii) Safety Stock = (Annual Demand/365) x (Maximum Reorder Period – Average Reorder Period)

(iv) Reorder level or Ordering level = Maximum rate of consumption × Maximum reorder period. Alternatively, it will be = safety stock + lead time consumption

[lead time consumption will be = (Annual consumption -s- 360) × lead time]

(v) Danger level = It is slightly below the minimum level. It is a level at which special efforts should be made to obtain supplies of materials, i.e.

Minimum rate of consumption × Emergency delivery time

(vi) Average Stock level = (Maximum stock level + Minimum stock level) x 14 or Minimum Stock level + 14 Reorder Quantity.

Obviously, the Reordering level is below the Maximum level, and Minimum level is below the Reordering level and the Danger level is below the Minimum level. Safety Stock is above minimum level.

Illustration 1: [Fixation of stock levels]:

Two components A and B are used as follows:

Normal usage 50 units per week each

Minimum usage 25 units per week each

Maximum usage 75 units per week each

Reorder Quantity A 300 units; B 500 units

Reorder Period A 4 to 6 weeks, B 2 to 4 weeks

Calculate for each components:

(a) Reorder level,

(b) Minimum Level,

(c) Maximum level,

(d) Average Stock Level.

Solution:

(a) Reorder Level = Maximum Rate of Consumption x Maximum Reorder Period.

A = 75 x 6 = 450 units

B = 75 x 4 = 300 units

(b) Minimum Level = Reorder Level – (Average Rate of consumption x Average Reorder Period)

A = 450 – (50 – 5) = 200 units

B = 300 – (50 x 3) = 150 units

(c) Maximum Stock Level

= (Reorder Level + Reorder Quantity) – (Minimum Consumption Rate x Minimum Reorder Period)

A = (450 + 300) – (25 x 4) = 650 units

B = (300 + 500) – (25 x 2) = 750 units

(d) Average Stock Level = (Maximum Stock Level + Minimum Stock Level)/2

A = (650 + 200)/2 = 425 units

B = (750 + 150)/2 = 450 units

Average Stock Level can also be calculated by the formula.

Minimum Stock Level + ½ of Reorder Quantity

A = 200 + ½ x 300 = 350 units

B = 150 + ½ x 500 = 400 units

Illustration 2:

If the minimum stock level and average stock level of raw material A are 4,000 and 9000 units respectively, find out its reorder quantity.

Solution:

Average stock level = Minimum stock level + ½ of Reorder Quantity

9000 = 4000 + of Reorder Quantity

½ Reorder Quantity = 9000 – 4000 = 5000

Reorder Quantity = 10,000 units

NOTE - IT IS MENTIONED IN QUESTION THAT WE CAN GIVE OUR OWN EXAMPLR