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Order Point Calculation

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Order Point Calculation

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    1. Intro to Manufacturing Lean Tools 1 Order Point Calculation Order Point = (LT x Avg) + (StdDev x ServFactor) LT = Lead time to replenish shelf Avg = Average demand per period (typically per week) StdDev = Standard deviation in the demand per period (this measures how variable the demand is compared to the average) ServFactor = Service Factor per table below (what percentage of the time should a customer be able to get the desired quantity from the shelf) Service Level Service Factor 84.0% 1.0 93.5% 1.5 97.5% 2.0 99.3% 2.5 99.8% 3.0

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