Sports Inc. (SI) has selected the flagship stores for the German speaking market, in Austria/Switzerland and...

 

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Sports Inc. (SI) has selected the flagship stores for the German speaking market, in Austria/Switzerland and the south of Germany. So, SI has become operational in this area. The COO is now turning to the problem of determining the inventory strategy. For each flagship store, the inventory positioning strategy is to be calculated. We concentrate on the store in Landeck, which serves the 5 communities mentioned in the table below, with given demand expectation. To simplify the problem, we consider the daily demand to be constant over the year in every community. This demand is normally distributed with mean and standard deviation as given in the table. The Landeck store must develop an ordering strategy for its area. 1. The Munich production plant manufactures the shoes in a high pace; sufficient to guarantee delivery of orders within a lead time of 5 days. Argue why the Economic Order Quantity (EOQ) model is the correct model to determine the order quantity. The reorder point (ROP) is determined based on the lead time. What are the two components for determining the ROP, and explain the conditions that underly the two components. 2. Landeck is a community with a flagship store. The daily demand is characterized by a normal distribution with a mean of 40 and a standard deviation of 15. Order costs are €100 per order and transportation costs from Munich to the respective communities are €200 per order and you can assume that an order always fits in a single truck. Inventory holding costs per item in inventory per year are 5% of the sales price of €80. Determine the optimal order quantity and the reorder point (ROP) such that the probability of getting out of stock is limited to 10%, ie, the Quality-of-Service (QoS) level is 90%. You may assume that a year has 250 working days, 3. The COO is wondering what the effect of a higher QoS level has on the EOQ and the ROP, and thus what the extra costs are for a higher QoS level. Determine and graph the extra costs for all QoS levels of 90%,91%,92%.... 99%. The COO next focuses on the lead time of 5 days. He thinks that it should be shortened to reduce safety stock. Compute and graph the safety stock levels in case the lead time of 5 days is reduced to 4,3,2,1,0 days. Use a Qo5 of 90%. DO<< III Exercise 2: Sports Inc. Inventory management. (2/2) There are 5 flagship stores with the following demand Table 2: Community Sankt-Anton Landeck Imst Oetz Umhausen 5. Daily demand distribution Longitude 47,1296346 N(10,5) N(40, 15) N(40, 25) N(10, 5) N(15, 10) 47,1405700 47,2401300 47,2031962 47,1358205 Latitude 10,2681786 10,5655800 10,7395400 10,8965975 10,9261304 Consider the above five Brick&Mortar stores with their demand distribution. For each of them compute the ROP and the safety stock involved with the data of questions 1 and 2: QoS of 90 % and lead time of 5 days. Through E-commerce channels one might satisfy the orders of each of the five communities above, by mail from the plant in Munich. Compute the ROP and the safety stock involved in the Munich plant. How does the result compare to the individual ROP's of the five flagshop stores? 6. Discuss the (dis)advantages of having all units in one location versus multiple locations. Sports Inc. (SI) has selected the flagship stores for the German speaking market, in Austria/Switzerland and the south of Germany. So, SI has become operational in this area. The COO is now turning to the problem of determining the inventory strategy. For each flagship store, the inventory positioning strategy is to be calculated. We concentrate on the store in Landeck, which serves the 5 communities mentioned in the table below, with given demand expectation. To simplify the problem, we consider the daily demand to be constant over the year in every community. This demand is normally distributed with mean and standard deviation as given in the table. The Landeck store must develop an ordering strategy for its area. 1. The Munich production plant manufactures the shoes in a high pace; sufficient to guarantee delivery of orders within a lead time of 5 days. Argue why the Economic Order Quantity (EOQ) model is the correct model to determine the order quantity. The reorder point (ROP) is determined based on the lead time. What are the two components for determining the ROP, and explain the conditions that underly the two components. 2. Landeck is a community with a flagship store. The daily demand is characterized by a normal distribution with a mean of 40 and a standard deviation of 15. Order costs are €100 per order and transportation costs from Munich to the respective communities are €200 per order and you can assume that an order always fits in a single truck. Inventory holding costs per item in inventory per year are 5% of the sales price of €80. Determine the optimal order quantity and the reorder point (ROP) such that the probability of getting out of stock is limited to 10%, ie, the Quality-of-Service (QoS) level is 90%. You may assume that a year has 250 working days, 3. The COO is wondering what the effect of a higher QoS level has on the EOQ and the ROP, and thus what the extra costs are for a higher QoS level. Determine and graph the extra costs for all QoS levels of 90%,91%,92%.... 99%. The COO next focuses on the lead time of 5 days. He thinks that it should be shortened to reduce safety stock. Compute and graph the safety stock levels in case the lead time of 5 days is reduced to 4,3,2,1,0 days. Use a Qo5 of 90%. DO<< III Exercise 2: Sports Inc. Inventory management. (2/2) There are 5 flagship stores with the following demand Table 2: Community Sankt-Anton Landeck Imst Oetz Umhausen 5. Daily demand distribution Longitude 47,1296346 N(10,5) N(40, 15) N(40, 25) N(10, 5) N(15, 10) 47,1405700 47,2401300 47,2031962 47,1358205 Latitude 10,2681786 10,5655800 10,7395400 10,8965975 10,9261304 Consider the above five Brick&Mortar stores with their demand distribution. For each of them compute the ROP and the safety stock involved with the data of questions 1 and 2: QoS of 90 % and lead time of 5 days. Through E-commerce channels one might satisfy the orders of each of the five communities above, by mail from the plant in Munich. Compute the ROP and the safety stock involved in the Munich plant. How does the result compare to the individual ROP's of the five flagshop stores? 6. Discuss the (dis)advantages of having all units in one location versus multiple locations.

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