Question

What recommendations should Rachel make in her presentation to Tasty Treats management?
Tasty Treats is a distributor of candy and snack products. The company carries over 5,000 items in inventory but has never had anyone knowledge of inventory management policies. Instead it has relied on rules of thumb and judgment to determine order quantities and safety stock levels. Bill Jones, COO and Jim Busfield, CEO have assigned Rachel Atkins, a student intern, to use her knowledge of inventory management to make recommendations to management. They specifically asked her to look at one product-Chocolate Chewies. Currently Tasty Treats sells an average of 100 cases per day on each of the 300 days it is open. The firm orders every 10 days because it takes 10 days to get Chocolate Chewies from the supplier. The firm also attempts to keep safety stock of 200 units. Rachel gathered the following information for her analysis of Chocolate Chewies:
Product Cost: $25.00 per case
Ordering Cost: $100 per order
Inventory Carrying Cost: 15 percent
Standard deviation of demand = 8 cases per day
Standard deviation of lead time = 2 days
The sales representative for the supplier also informed Rachel that Tasty Treats could get a reduced price of $24.50 if it ordered at least 3,000 cases per order.
Finally the sales staff informed Rachel that they thought a 99% service level was appropriate. Bill and Jim suggested she also consider a 95% service level.


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  • CreatedMarch 30, 2015
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