Using the safe URL below, please answer the following two questions. I need to check my work.
Question:
Using the safe URL below, please answer the following two questions. I need to check my work. Thanks!
- KLF Electronics is evaluating the potential for implementing periodic review inventory policy; however, their primary concern is lowering costs without compromising service quality.
a. Assuming that the time between orders (review period r) remains the same for each regional warehouse, compute and describe its inventory management policy and associated cost using the current distribution system (Figure 1a). Ignore inbound and outbound transportation cost. Provide answers and calculations for Base stock, safety stock, average inventory level, inventory holding cost per week, ordering cost per week, and total cost per week. Compare with your answers to question 1, and report percentage change in inventory holding cost per week, ordering cost per week, and total cost per week for maintaining all the five regional warehouses. Comment on your findings.
b. Redo similar analysis for the case of a single, centralized warehouse. Compare with your answers to question 2, and report on percentage change in inventory holding cost per week, ordering cost per week, and total cost per week. Comment on your findings.
2. Suppose a new, centralized warehouse is added to serve Atlanta, Boston, Chicago, and Dallas as shown in Figure 1c. The manufacturing facility will continue to serve the Los Angles warehouse given its proximity and newly added centralized warehouse. Assuming that all warehouses are following the continuous review inventory policy, compute and describe its inventory management policy and associated cost. Keep in mind that the centralized warehouse is one echelon above regional warehouses. 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. Compare ordering, holding, and total cost of this distribution system with your answers to questions 1 and 2. Which distribution system has the lowest cost out of all three described? Comment on your findings.
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