1. Inventory Assessment Current available inventory: Current stock = 120 units − 20 reserved − 5 damaged = 95 usable units. Estimated demand during lead time: 25 units/day × 7 days = 175 units. Reorder point comparison: Reorder rule = below 200 units. Available inventory = 95 units, which is 105 units below the reorder threshold. Stockout risk: High. The business has only 95 usable units, while expected 7-day demand is approximately 175 units. Without replenishment, inventory would be insufficient to cover the stated lead time. Overstock risk: Low to moderate. Storage cost is low, stockouts are considered more costly, and the proposed order quantity can remain well below the 500-unit maximum. 2. Reorder Decision REORDER NOW The product is already below the 200-unit reorder threshold, with only 95 usable units available. Expected demand during the 7-day supplier lead time is 175 units, creating a significant stockout risk. The supplier's 100-unit minimum order quantity also makes an immediate replenishment practical. 3. Recommended Order Recommended quantity: 100 units This is the supplier's minimum order quantity and is sufficient to replenish stock without making an unnecessarily large purchase. Expected inventory after receiving the order: 95 + 100 = 195 units At approximately 25 units/day: 195 ÷ 25 = 7.8 days of demand coverage So, after receiving the order, the business would have approximately 7.8 days of expected demand coverage. However, there is an important limitation: because the business is expected to sell approximately 175 units during the 7-day lead time, the current 95 units alone would not cover that period. The business therefore needs to manage inventory carefully while waiting for delivery. Assumption: The calculation uses the supplied expected demand of 25 units/day and assumes reserved and damaged units cannot be sold. 4. Risk Analysis Risk Assessment Reason Stockout risk High 95 usable units vs. 175 expected units during lead time Overstock risk Low–Moderate 100-unit order is small relative to the 500-unit maximum Cash-flow risk Moderate 100 units × $8 = $800 product cost Supplier/lead-time risk Moderate The 7-day lead time creates exposure if demand increases or delivery is delayed 5. Action Plan Place a 100-unit reorder now, while monitoring daily sales and the supplier's delivery progress. After the order arrives, reassess inventory against the 200-unit reorder threshold, 50-unit safety-stock target, and 500-unit maximum inventory level before placing another order.