CIPS Level 4 Whole Life Asset Management L4M7 · Free Practice Question Easy
Question 12
Simba has a small bakery and he wants to know his reorder point for flour. He uses up to 12 bags a day and his supplier can take up to 6 days to deliver. On a typical day, he uses 5 bags a day and his supplier takes 4 days to deliver. When should Simba order more flour?
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A
When Simba has 72 bags left in stock
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B
When Simba has 52 bags left in stock
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C
When Simba has 20 bags left in stock
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D
When Simba has 10 bags left in stock
Reveal correct answer
Correct answer: A
Explanation
To answer the question, you should know the formula of calculating the reorder point. The reorder point formula is your average daily use, multiplied by your average lead time in days, then plus safety stock.
Reorder point = (Average daily usage x Average lead time in days) + Safety stock
Safety stock is a buffer of inventory held to protect against stock-outs.
Safety stock = [maximum daily use x maximum lead time] – [average daily use x average lead time]
In the question, safety stock = 12*6 - 4*5 = 52 bags
The reorder point level = 5*4 + 52 = 72 bags
So, Simba should place a new order when he has 72 bags left in stock
Discussion
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