SCM $300$Lab #$4$

PART $1$: Supply Chain Shrinkage

Below is an overview of how materials move through the supply chain. For each set of parties

listed you$$ll also see a loss or defect rate associated with that portion of the supply chain.

A$.$ Suppliers: $1\mathrm{.}0\%$ of all materials delivered are unacceptable for use

B$.$ Manufacturing: $0\mathrm{.}9\%$ of items produced are defective and are thus not shipped

C$.$ Distribution: $1\mathrm{.}1\%$ of the items shipped are lost, stolen, or damaged in transit

D$.$ Retail Store: $1\mathrm{.}2\%$ of items are stolen$/$damaged and thus unavailable for sale

Question #$1$

Using the calculation for damage and defects discussed in lecture, calculate the number of

standardized sets that must be planned for in order to have $7,500$ sets available to the customer

each month. Formula $($Actual Demand$/$ Proportion Acceptable$)$

Retail$-1\mathrm{.}2\%$ Start by:$1-\mathrm{.}012=(7500/\mathrm{.}988)=7,592$

Distribution$-1\mathrm{.}1\%$ So $7592/0\mathrm{.}989=7677$ ANSWER

Maufacturing$-0\mathrm{.}9\%$ So $7677/\mathrm{.}91=8436$

Supplies$-1\mathrm{.}0$& So $8436/0\mathrm{.}99=8521$

Question #$2$

Based on our estimates, how many extra kitchen sets will need to be purchased$/$produced to

account for the damage, theft, defects...PER YEAR?

$7677-7500(12$ mo$)=2124$ each YEAR

Question #$3$

The kitchen sets sell for $$275\mathrm{.}00$ per set. They cost about $$200$ to produce, deliver, and sell,

though. Based on the number of additional items needed to account for shrinkage, how much

will the company lose this year?

$200$x$2124=424800$