Kings Chemicals is a company based in Toronto, ON that manufacture’s household cleaning products. They have been in this business for over 50 years and are known for the large variety of available cleaning solvents, sprays, and disinfectants. Kings is has top-class quality and is a preferred choice for middle and upper middle-class customers. Kings finds that over the past 6 months, its supply to Amazon is steadily increasing as more people are taking to online e-commerce platforms due to fear of COVID spread in retail stores like Walmart.

For this case, we will purely be analyzing Kings Chemicals’ flagship product the Super Cleaner which is a great cleaning liquid for kitchen surfaces. This comes in spray bottles and there is only 1 variety of this product that Amazon purchases. Amazon gives them a forecast every week based on some calculations that they have done based on the buying pattern on their website. We assume that the demand is constant every week (this is not reality but for the purpose of this case ONLY)

You are the Inventory Manager at Kings Chemicals and you have a meeting with me, the factory manager. The meeting is about finding out our inventory management plan for the Super Cleaner with respect to the orders Amazon places on it. You know the following details about the Super Cleaner product.

From the time of receipt of the order, Kings Chemicals takes 2 weeks to manufacture it and there is a 1-week transit time to the nearest Amazon warehouse. They say that in 2019 (52-week period), they consumed 50,000 spray bottles of Super Cleaner with a Standard Deviation of 200 Bottles. It costs $3.50 for each bottle and 10% of that cost is the cost for Kings Chemicals to store the product before shipping. The total costs of salaries and IT infrastructure for the ordering costs equal $10 per bottle. Kings Chemicals has always been servicing its customers at a 92% service level.


I have asked you for answers to the following questions.

1. Amazon’s Managing Director recently called me and told me that they will accept any order quantity that minimizes Kings Chemicals’ total costs. Can you tell me what is this quantity?

2. At what point should I re-Order and what will be my Total Costs in this arrangement? (Do not consider Safety Stock for this calculation)

3. What should our safety stock levels be? (Z=1.405)

4. We know that each spray bottle comes with 1 spray nozzle. How many orders of spray nozzles should I place on my spray nozzle manufacturer?

5. I am exploring purchasing and upgrading our company’s ERP software. What are some of the advantages and disadvantages of this?

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