What is the recommended reorder point formula for construction materials with variable demand?
Correct Answer
D) Maximum daily usage × maximum lead time + safety stock
For variable demand situations, the reorder point should account for worst-case scenarios by using maximum daily usage and maximum lead time, plus safety stock to prevent stockouts during demand spikes or delivery delays.
Why This Is the Correct Answer
Option B is correct because variable demand construction environments require protection against worst-case scenarios. Using maximum daily usage and maximum lead time ensures materials are available even during peak demand periods and longest delivery delays. The addition of safety stock provides an extra buffer against unexpected demand spikes or supply chain disruptions that are common in construction projects.
Why the Other Options Are Wrong
Option B: Economic order quantity ÷ 2
Option C uses minimum daily usage which would severely underestimate material needs and virtually guarantee stockouts during normal or peak demand periods.
Option C: Average daily usage × lead time
Option A only uses average values which don't account for demand variability or supply delays, potentially causing stockouts during peak usage periods or extended delivery times.
Memory Technique
Think 'MAX + MAX + SAFETY' - Maximum usage times Maximum lead time plus Safety stock protects against Maximum problems in variable demand situations.
Reference Hint
Construction Project Management or Materials Management chapter in contractor reference manual, specifically inventory control sections
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