Question: I think I have this figured out, but need a double check... Thank you Here is the question: Regional distributors are currently using continuous review
I think I have this figured out, but need a double check... Thank you
Here is the question: Regional distributors are currently using continuous review inventory policy. Compute and describe their inventory management policy and associated cost. Ignore inbound and outbound transportation cost. Provide answers and calculations for order quantity, demand during lead time, safety stock, average inventory level, inventory holding cost per week, ordering cost per week, and total cost per week.
The service level is 90% and the average lead time is 2 weeks.
Here is the style I used to answer.
| Q* | Ddlt | SS | Avg Inv | Inv cost | Ord Cost | Tot Cost | |
| Atlanta | |||||||
| Boston | |||||||
| Chicago | |||||||
| Dallas | |||||||
| LA | |||||||
| Total cost of the distribution system | |||||||
Supporting info:
| Inbound TRANSPORTATION COSTS PER UNIT PRODUCT | ||||||
| Warehouse | Inbound | Outbound | ||||
| Atlanta | $ 12.00 | $ 13.00 | ||||
| Boston | $ 11.50 | $ 13.00 | ||||
| Chicago | $ 11.00 | $ 13.00 | ||||
| Dallas | $ 9.00 | $ 13.00 | ||||
| Los Angels | $ 7.00 | $ 13.00 | ||||
| Table 3: Outbound Transportation Costs per Unit in Single Centralized System | ||||||
| Warehouse | atlanta | boston | chicago | dallas | los angles | |
| Atlanta | $ 13.00 | |||||
| Boston | $ 16.00 | $ 13.00 | ||||
| Chicago | $ 16.00 | $ 10.00 | $ 13.00 | |||
| Dallas | $ 17.00 | $ 17.00 | $ 17.00 | $ 13.00 | ||
| Los Angels | $ 19.00 | $ 19.00 | $ 18.00 | $ 10.00 | $ 13.00 | |
| Table 4: Ordering Cost and Holding Costs (per unit per week) | |||
| cost at | ordering cost | holding cost | |
| current system | regional warehouse | $ 5,550.00 | $ 1.25 |
| central warehouse | central warehouse | $ 5,550.00 | $ 1.25 |
| mixed model | central warehouse | $ 3,000.00 | $ 1.00 |
| fegional wareshoue | $ 3,000.00 | $ 1.25 | |
| HISTORICAL demand for 12 weeks | ||||||||||||
| Week | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
| Atlanta | 33 | 45 | 37 | 38 | 55 | 30 | 18 | 58 | 47 | 37 | 23 | 55 |
| Boston | 26 | 35 | 41 | 40 | 46 | 48 | 55 | 18 | 62 | 44 | 30 | 45 |
| Chicago | 44 | 34 | 22 | 55 | 48 | 72 | 62 | 28 | 27 | 95 | 35 | 45 |
| Dallas | 27 | 42 | 35 | 40 | 51 | 64 | 70 | 65 | 55 | 43 | 38 | 47 |
| Los Angels | 32 | 43 | 54 | 40 | 46 | 74 | 40 | 35 | 45 | 38 | 48 | 56 |
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