CURRENT BUFFER STOCK COMPARISON & RECOMMENDATIONS (25 points)

Question No. 4. Do current safety stocks protect the operation adequately from supplier delivery performance issues ? If not, how much safety stock do you suggest to be carried for each part number and in total stated in pieces and dollars ?

Fill missing spaces in table to calculate.

High Runner Purchased Parts

	PART NO. 1A1	PART NO. CCC	PART NO. 2B2
Risk of Exposure to Material Shortages in Days (*)	(3 days X 0.15)= 0.45 days	(1day X 0.02)= 0.02 day	(1 day X 0.1)= 0.1 day
Current Planned Safety Stock in Days	0.29 day	?	?
Position vs Current Safety Stock Level	0.16 day short	?	?
Daily Requirement	3500 pcs	24000 pcs	1000 pcs
Suggested Safety Stock Level in Pieces	(0.45 X 3500)= 1575 pcs	?	?
Suggested Safety Stock Level in Dollars	( 1575 X $500)= $ 788 M	?	?

Suggested Total Safety Stock in pieces = _________________________

Suggested Total Safety Stock in dollars = _________________________ Suggested Total Safety Stock in Dollars = Suggested SS for Part 1A1 + Suggested SS for part CCC + Suggested SS for Part 2B2 ( all in dollars)

(*) There are different ways of estimating risk of material shortages depending on the operation, the vendors, the supply process and the business environment. For this case study the method selected was just to translate the vendors delivery performance and recovery capability into a risk period expressed in days. (Ex: On 15% of the orders the vendor for part 1A1 is late and recovers in average of 3 days after due date)

Tip

Question No. 5.- If you concluded to suggest new buffer stock levels would these changes improve the companys cash flow position ? If so, by how much ?

Difference in Cash Position = _________________________

Compare initial Total Inventory in Dollars with Total Inventory in Dollars using suggested SS levels

Tip

CONCLUSIONS AND OTHER RECOMMENDATIONS (25 points)

Question No. 6.- What purchasing practice could you suggest changing, regardless of buffer stock levels, which could have an even greater impact on cash flow ?

Check the lot size inventory generated

Explain: _______________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________

Tip