nventory Management

Application $1$: Estimating Inventory Levels

Management has decided to establish three Distribution Centers $($DC$)$ in its supply chain,

located in different regions of the country, to save on transportation costs. For one of the

products, the average weekly demand at each DC will be $50$ units. The product is valued

at $$650$ per unit. Average shipment sizes into each DC will be $350$ units per trip. The

average lead time will be two weeks. Each DC will carry one week$$s supply as safety

stock, since the demand during the lead time sometimes exceeds its average of $100$ units

$(50$ units$/$wk $2$ wk$).$ Anticipation inventory should be negligible.

a$.$ How many dollars, on the average, of cycle inventory will be held at each DC$?$

b$.$ How many dollars of safety stock will be held at each DC$?$

c$.$ How many dollars of pipeline inventory, on the average, will be in transit for

each DC$?$