You are the logistics manager for an electronics manufacturer HQ’d in the United States. A new upper management has come into power, and they are heavily focusing on the company’s financial performance. One of their prime targets is the company’s inventory levels globally. You have been assigned the task of looking at the company’s inventory levels and making suggestions to improve performance. The director of Logistics has given you the following data set. Your job is to evaluate the following 20 SKU’s and their demand patterns over the last three years.

Calculate the bulleted points below, and Assume Ordering costs and holding costs are the same for all SKU’s.

  • 3 period Moving average Forecast for 2014
  • Reorder Point
  • EOQ
  • Maximum Inventory Level
  • Minimum Inventory Level
  • Cost of Excess AND Cost of Shortage
  • Ordering Cost=$50
  • Holding Cost=2.5

Once this has been done, the director will ask you to classify each part as A,B or C.

 

 

 

 

 

SKU

Cost

Sale Price

2013 Demand

2012 Demand

2011 Demand

 Dollar Usage

%Total Dollar Usage

Annual Holding Cost per Unit

Lead Time (days)

Item 1

0.2

0.6

1500

1450

1350

10

Item 2

20

60

3

32

23

10

Item 3

55

165

50

70

65

10

Item 4

1300

3900

20

15

12

30

Item 5

245

735

100

140

200

10

Item 6

75

225

70

75

90

10

Item 7

10000

30000

12

6

4

90

Item 8

345

1035

500

600

900

60

Item 9

211

633

39

23

45

45

Item 10

0.45

1.35

3450

3000

5000

10

Item 11

8

24

3000

2300

3400

10

Item 12

10.5

31.5

450

750

650

10

Item 13

0.5

1.5

5000

10000

3300

10

Item 14

155

465

150

120

100

10

Item 15

1.32

3.96

4000

3000

1500

10

Item 16

13.6

40.8

2300

4000

3000

10

Item 17

3000

9000

120

90

110

90

Item 18

1.25

3.75

4500

4000

3300

10

Item 19

540

1620

90

80

20

30

Item 20

750

2250

300

200

500

30

 

2) Pam runs a mail order business for gym equipment. Annual demand for the TricorFlexers is $16000. The annual holding costs per unit is $2.50 and the order costs are $50. What is the EOQ?

3) Using the same holding and ordering costs as above, suppose demand for the TriFlexors doubles to 32000. Does the EOQ double as well?

4) Quizno’s sells large tins of Tom Tucker’s Toffee. The deli uses a periodic review system checking inventory every 10 days, at which time an order is placed for more tins. Lead time is 3 days. Average daily demand is 7 tins, so average demand during the reorder period and lead time (13 days) is 91 tins. The standard deviation of demand during this same 13 days is 17 tins. Calculate the restocking level

5) If your company has demand of 50,000 units per year and a supplier lead time for replenishment is 10 days. At what reorder point would you need to trigger another order?

6) TriCor Company manufactures a fitness product. The following data is collected for the previous year. Calculate the Reorder quantity, reorder level, maximum level of inventory and minimum level of inventory using the data below.

  • Monthly Demand: 10,000
  • Order Costs:$50
  • Normal Usage: 500 units per week
  • Max Usage: 750 units per week
  • Min Usage:  250 units per week
  • Reorder Period: 4-6 weeks