2009 2010 (this is the answer to question 1)

Net Sales 86.3. 103.56

COGS. 38.9. 46.68

Months of Inventory

2.690 2.690

Value of the Average Inventory ($)

6.8. 9.582

2. (Irrespective of your answer in question 1) Suppose the total value of 2010 inventory is $10 million and the increase in value of inventory required by Scientific Glass is $1.5 million.

Gregory and Hayes suggest four policy changes to reduce the value of the average inventory. For each suggested change below, estimate the savings that can be expected if the change is successfully implemented and discuss if the estimated savings can compensate for the increase of $1.5 million.

a.It is estimated that for 10% of all products, Scientific Glass maintains too high of a service level. Assuming this high service level is 99.9% suppose the company enforces a strict 99% service level.

i. Using data from the case and Exhibit 3, complete the table below. (Hint: Refer to the solved

inventory problems document for additional examples) (2 points)

Exhibit 3 Information on Representative Products Griffin 500ml Erlenmeyer Beaker 500ml Flask 2009 units sold 11,268 3,389 Percent of all units sold 0.1% 0.03%% Annual carrying cost (%) 14% 14% Unit price $ 8.80 $ 9.50 Unit cost $ 3.96 $ 4.56 Cost of underage $ 0.48 Cost of overage $ 0.49 $ 0.021 $ 0.025 Optimal service level 95.8% 95.3% Average bi-weekly demand (8 warehouses) 54.2 16.3 Standard deviation of bi-weekly demand (8 warehouses) 21.4 10.9 Average bi-weekly demand (2 warehouses) 216.7 65.2 Standard deviation of bi-weekly demand (2 warehouses) 38.3 19.5 Average bi-weekly demand (1 warehouse) 433.4 130.3 Standard deviation of bi-weekly demand (1 warehouse) 51.0 26.0Product Griffin Beaker Erlenmeyer Flask Service Level 99% 99.9% 99% 99.9% Z-Value 2.33 3.09 2.33 3.09 Average Weekly Demand Stdev of Weekly Demand POU (weeks) Q Average Pipeline Inventory Begin on hand SS Average On-Hand Average Inventory