Question

Raghuram has been appointed as the stock incharge in a readymade shirt manufacturing company. The Production Manager asks Raghuram to ensure the availability of fabric without any interruption so that there is no stock-out situation. For this Raghuram wants to know the re-order point of fabric for the company, that is to determine when to place an order. For this he found out the procurement lead time, which is 2 months, and the demand during this period, which is expected to be 300 bales of cotton fabric per month. So the order should be placed when the stock reaches:

Options

• 600 bales

• 450 bales

• 300 bales

• 150 bales

Answer 1

600 bales

Explanation:

Re-order point = Lead time × Demand per month

Given:

Lead time = 2 months
Demand per month = 300 bales

Re-order point = 2 × 300

= 600 bales