3) This question will have you calculating 2 different EOQ and ROP values and interpreting the results. For both EOQ and ROP, give your final answer in full sock sets (ROUND UP to the next whole number). The specific questions to answer are based in parts a-c. Tips to solve the EOQ and ROP are given below in bullet points. a) Calculate EOQ and ROP for FY2020 based on the FY2020 forecast value that you determined to be most accurate in Question #1. b) Calculate the EOQ and ROP based upon actual demand for FY2020 c) Use the total inventory cost calculation determine total inventory costs for each of the three EOQ results: EOQ from part a EOQ from part b, and the Q that Throx is currently using (given in the case) When determining the costs use 2020 actuals for your Demand (D). i Compare the total inventory costs from the three results and analyze what it shows you. ii. What are the implications of the ROP Throx is currently using versus the ROP based on Actual Demand. See additional tips below: Use a service level of 95% (z=1.65) when calculating the ROP For the standard deviation of weekly demand, use the data provided in the table on page 2 of the case with the FY2020 forecast for all approaches. Annual Inventory management costs will include the following: Annual Holding Costs, Annual Ordering Costs, and Purchase Cost. Product Orders (Demand) Information The company provides you with the following information for the past two fiscal years: Demand Characteristic Annual Demand, sets Average Weekly Demand Std Dev of weekly Demand 2019 2020 26,450 29,940 509 576 127 144 Product Forecasting Information Throx uses two main forecasting methods based on annual data to predict orders for the following year, a weighted moving average and exponential smoothing. They provide you with the following information about forecasts for FY 2017 through FY2020: 2017 2018 2019 2020 Actual Demand (Three Sock Sets) 18,500 22,875 26,450 29,940 Weighted Moving Average Fest 14,500 17,750 21,563 25,378 Exponential Forecast 15,000 17,800 21,860 25,532 = Weighted Moving Average uses Wi= 0.7 and W1-1=0.3 Exponential Smoothing uses a = 0.8. Inventory Management Information The initial inventory for all sock styles combined at the beginning of FY 2021 is 2,250 units. You also have information on current costs, which includes: Order cost to Thzex for an order placed with its current supplier, S/order = S = $275 Holding cost per set per year=H= $1.75 The company currently pays $6.80 for each set of socks. =P The company uses a continuous review replenishment policy, and has IT systems in place that allow constant monitoring of key information. Last year, the company used an ROP under this policy of 2,200 units for all sock styles and an order quantity of 5,000 units for all sock styles. Potential Alternatives to Current Supply Chain Management The company has asked you to evaluate a number of alternatives to their current SCM practices, including at a minimum their choice of supplier, transportation modes, warehouse capacity, order quantities and safety stock. Alternative Suppliers The company has contacted potential alternative suppliers in China, who have offered the following information relative to the current supplier: Supplier Characteristic Unit Price, $/3-sock set Order cost, S/order QA CPK Financial condition of the firm Current Alternative A Alternative B Welght $ 6.80 $ 6.00 $ 6.10 0.4 $ 275$ 325$ 220 0.2 TBD TBD TBD 0.2 Good Poor Fair 0.2 For the quality performance assessment of the suppliers, Thox would like you determine the Capability Index CPk for each Supplier based on the following information. Threx considers it critical that the suppliers can meet their minimum Sock Thickness: 6mm Measures in mm Mean Sock Thickness Standard Deviation Current 6.5 0.15 Alternative 6.2 0.11 Alternative B 6.7 0.18 Alternative Transportation An alternative to their current transportation approach available to Threx is shipment by UPS Express Air from Shanghai to Richmond, which averages 3.5 days. The comparison of costs is given as: Maersk Ocean Freight UPS AirExpress Transporation Supplier Characteristics (current) (Alternative) Units cost, S/sock set S 2.75$ 4.75 Damage Rate 2.8% 0.5% Average Transit time, weeks 0.5 4 * No data are available about variation in transit times, so Ihrex assumes this is constant. Similar to their decision about sourcing. Threx wants to use a single-sourcing strategy for transportation, so they want a recommendation about which mode would be best. NOTE: Ignore the current port capacity issues when making your decision/ recommendation Alternative Warehouse Location Market LA-Long Beach San Francisco San Diego Sacramento Population 15,800,000 8,700,000 4,500,000 2,500,000 X 34 38 33 39 Y 118 122 117 121 The company would also like to assess whether its current warehouse location is appropriate based on where customers are located. It provides you the following information about its key markets, and indicates that its orders in each market are roughly proportional to the total population 3) This question will have you calculating 2 different EOQ and ROP values and interpreting the results. For both EOQ and ROP, give your final answer in full sock sets (ROUND UP to the next whole number). The specific questions to answer are based in parts a-c. Tips to solve the EOQ and ROP are given below in bullet points. a) Calculate EOQ and ROP for FY2020 based on the FY2020 forecast value that you determined to be most accurate in Question #1. b) Calculate the EOQ and ROP based upon actual demand for FY2020 c) Use the total inventory cost calculation determine total inventory costs for each of the three EOQ results: EOQ from part a EOQ from part b, and the Q that Throx is currently using (given in the case) When determining the costs use 2020 actuals for your Demand (D). i Compare the total inventory costs from the three results and analyze what it shows you. ii. What are the implications of the ROP Throx is currently using versus the ROP based on Actual Demand. See additional tips below: Use a service level of 95% (z=1.65) when calculating the ROP For the standard deviation of weekly demand, use the data provided in the table on page 2 of the case with the FY2020 forecast for all approaches. Annual Inventory management costs will include the following: Annual Holding Costs, Annual Ordering Costs, and Purchase Cost. Product Orders (Demand) Information The company provides you with the following information for the past two fiscal years: Demand Characteristic Annual Demand, sets Average Weekly Demand Std Dev of weekly Demand 2019 2020 26,450 29,940 509 576 127 144 Product Forecasting Information Throx uses two main forecasting methods based on annual data to predict orders for the following year, a weighted moving average and exponential smoothing. They provide you with the following information about forecasts for FY 2017 through FY2020: 2017 2018 2019 2020 Actual Demand (Three Sock Sets) 18,500 22,875 26,450 29,940 Weighted Moving Average Fest 14,500 17,750 21,563 25,378 Exponential Forecast 15,000 17,800 21,860 25,532 = Weighted Moving Average uses Wi= 0.7 and W1-1=0.3 Exponential Smoothing uses a = 0.8. Inventory Management Information The initial inventory for all sock styles combined at the beginning of FY 2021 is 2,250 units. You also have information on current costs, which includes: Order cost to Thzex for an order placed with its current supplier, S/order = S = $275 Holding cost per set per year=H= $1.75 The company currently pays $6.80 for each set of socks. =P The company uses a continuous review replenishment policy, and has IT systems in place that allow constant monitoring of key information. Last year, the company used an ROP under this policy of 2,200 units for all sock styles and an order quantity of 5,000 units for all sock styles. Potential Alternatives to Current Supply Chain Management The company has asked you to evaluate a number of alternatives to their current SCM practices, including at a minimum their choice of supplier, transportation modes, warehouse capacity, order quantities and safety stock. Alternative Suppliers The company has contacted potential alternative suppliers in China, who have offered the following information relative to the current supplier: Supplier Characteristic Unit Price, $/3-sock set Order cost, S/order QA CPK Financial condition of the firm Current Alternative A Alternative B Welght $ 6.80 $ 6.00 $ 6.10 0.4 $ 275$ 325$ 220 0.2 TBD TBD TBD 0.2 Good Poor Fair 0.2 For the quality performance assessment of the suppliers, Thox would like you determine the Capability Index CPk for each Supplier based on the following information. Threx considers it critical that the suppliers can meet their minimum Sock Thickness: 6mm Measures in mm Mean Sock Thickness Standard Deviation Current 6.5 0.15 Alternative 6.2 0.11 Alternative B 6.7 0.18 Alternative Transportation An alternative to their current transportation approach available to Threx is shipment by UPS Express Air from Shanghai to Richmond, which averages 3.5 days. The comparison of costs is given as: Maersk Ocean Freight UPS AirExpress Transporation Supplier Characteristics (current) (Alternative) Units cost, S/sock set S 2.75$ 4.75 Damage Rate 2.8% 0.5% Average Transit time, weeks 0.5 4 * No data are available about variation in transit times, so Ihrex assumes this is constant. Similar to their decision about sourcing. Threx wants to use a single-sourcing strategy for transportation, so they want a recommendation about which mode would be best. NOTE: Ignore the current port capacity issues when making your decision/ recommendation Alternative Warehouse Location Market LA-Long Beach San Francisco San Diego Sacramento Population 15,800,000 8,700,000 4,500,000 2,500,000 X 34 38 33 39 Y 118 122 117 121 The company would also like to assess whether its current warehouse location is appropriate based on where customers are located. It provides you the following information about its key markets, and indicates that its orders in each market are roughly proportional to the total population