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Basic Reorder Point Calculation
Demonstrates core ROP calculation for a single product with known demand statistics. Shows step-by-step formula application, service level comparison, and clear actionable recommendation.
Input
What you provide to the skill
Calculate reorder point for water bottles: 18 units/day average, 6.4 std dev, 14-day lead time, 95% service level
Output
What the skill generates for you
REORDER POINT ANALYSIS: Water Bottles
DEMAND ANALYSIS:
Average Daily Demand: 18.0 units/day
Demand Variability (Std Dev): 6.4 units/day
Coefficient of Variation: 35.6% (moderate variability)
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REORDER POINT CALCULATION:
Lead Time: 14 days
Service Level: 95% (Z-score: 1.65)
Step 1: Lead Time Demand
18.0 x 14 = 252.0 -> 252 units
Step 2: Safety Stock
SS = Z x sigma x sqrt(LT)
SS = 1.65 x 6.4 x sqrt(14)
SS = 1.65 x 6.4 x 3.74 = 39.5 -> 40 units
Step 3: Reorder Point
ROP = 252 + 40 = 292 units
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RECOMMENDED REORDER POINT: 292 units
When inventory drops to 292 units, place a new order.
- 252 units consumed during 14-day lead time
- 40 units safety stock buffer
- 95% probability of avoiding stockout
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SERVICE LEVEL COMPARISON:
90% (Z=1.28): Safety Stock 31, ROP 283, 9% stockout risk
95% (Z=1.65): Safety Stock 40, ROP 292, 5% stockout risk <- SELECTED
98% (Z=2.05): Safety Stock 50, ROP 302, 2% stockout risk
99% (Z=2.33): Safety Stock 56, ROP 308, 1% stockout risk
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SUMMARY:
- Reorder Point: 292 units
- Safety Stock: 40 units
- Lead Time Demand: 252 units
- When inventory reaches 292 units, place your next order
About This Skill
Calculate optimal inventory reorder points and safety stock levels using statistical analysis of historical sales data.
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