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Order Point Formula
The analysis discussed above tends to be somewhat cumbersome when probability distributions are most complex and dependent and multi-period cases are involved. In view of that several firms would search the subsequent formula helpful for calculating the reorder point.
Recorder Point = S (L) + √(SR (L))
Here S = Usage
L = lead time required to acquired additional inventory as the order is placed
R =average quantity ordered
F = stock-out acceptance factor.
The value of F, the stock-out acceptance factor is based on the stock-out percentage rate.
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