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The image presents a problem from Sauti Electronics, asking to determine four stock-related values based on given sales and lead-time data.

Here are the details we are working with:

- **Average sales**: 750 units/day
- **Maximum sales**: 950 units/day
- **Minimum sales**: 500 units/day
- **Lead time**: 12 to 18 days
- **Re-order quantity**: 17,500 units

We need to determine:

1. **The level of stock that a replenishment order will be required (Re-order level)**.
2. **The minimum level of stock possible**.
3. **The maximum level of stock possible**.
4. **The average level of stock**.

### (i) Re-order Level
The re-order level can be calculated as:
\[
\text{Re-order Level} = \text{Maximum daily usage} \times \text{Maximum lead time}
\]
\[
= 950 \times 18 = 17,100 \, \text{units}
\]

### (ii) Minimum Level of Stock
The minimum stock level ensures that operations continue while awaiting a new order. It's calculated as:
\[
\text{Minimum Stock Level} = \text{Re-order Level} - (\text{Average daily usage} \times \text{Average lead time})
\]
Average lead time = \( \frac{12 + 18}{2} = 15 \) days
\[
\text{Minimum Stock Level} = 17,100 - (750 \times 15) = 17,100 - 11,250 = 5,850 \, \text{units}
\]

### (iii) Maximum Level of Stock
The maximum stock level occurs right after a replenishment. It is calculated as:
\[
\text{Maximum Stock Level} = \text{Re-order Level} + \text{Re-order Quantity} - (\text{Minimum daily usage} \times \text{Minimum lead time})
\]
\[
= 17,100 + 17,500 - (500 \times 12) = 17,100 + 17,500 - 6,000 = 28,600 \, \text{units}
\]

### (iv) Average Level of Stock
The average stock level is the midpoint between the maximum and minimum stock levels:
\[
\text{Average Stock Level} = \frac{\text{Maximum Stock Level} + \text{Minimum Stock Level}}{2}
\]
\[
= \frac{28,600 + 5,850}{2} = \frac{34,450}{2} = 17,225 \, \text{units}
\]

### Summary of Results:
1. **Re-order level**: 17,100 units
2. **Minimum level of stock**: 5,850 units
3. **Maximum level of stock**: 28,600 units
4. **Average level of stock**: 17,225 units

Do you need further clarification or additional details on any of these calculations?

Here are five related questions to explore:
1. How would the re-order level change if the lead time increased?
2. What effect does reducing the re-order quantity have on the maximum stock level?
3. How does varying daily sales affect the re-order point?
4. What are the risks of maintaining a low minimum stock level?
5. How would extending lead time variability (e.g., 10-20 days) impact stock levels?

**Tip**: To minimize stockouts, companies often choose a re-order level based on the highest possible usage during the longest lead time.

Sauti Electronics is a popular car radio retailer. The following information was obtained from one of its outlets: Average sales: 750 units per day, Maximum sales: 950 units per day, Minimum sales: 500 units per day, Lead time: 12-18 days, Re-order quantity: 17,500 units. Required: Determine the following: (i) The level of stock that a replenishment order will be required. (ii) The minimum level of stock possible. (iii) The maximum level of stock possible. (iv) The average level of stock.

Learn how to calculate stock re-order level, minimum, maximum, and average stock levels for Sauti Electronics based on given sales and lead-time data. Includes detailed step-by-step calculations using key inventory management formulas. Suitable for business management and operations management students.

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