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HP DeskJet Printer Supply ChainCase Solution For fulfillment of the course onOperations ManagementbyGroup 1Akshay Soni, 1511077Mohan Raj, 1511103Rupsa Dasgupta, 1511120Sachin, 1511122Vanshraj Roy, 1511140Under the guidance ofProf. Jishnu HazraPost Graduate Program in ManagementIndian Institute of Management, Bangalore October 2015
Question 1:Consider the periodic-review, order-up-to model. Consider the air freight option by examining the cost of inventory for all models in Europe, using a 98% service level and the data given in Table 1 of the case. If the lead time is 5 weeks with sea freight and 1 week by air, and if the review period is 1 week because of production cycles at the factory, what savings in average inventory are available? Assume that the marginal production cost is roughly $300 and the selling price is $450. Per unit transportation cost is $10 by sea and $25 by air. Inventory carrying costs are 24% per year.Given data:Mode of transportLead time (in weeks)Marginal production cost $300Sea freight5selling price $450Air1Review period (in weeks)1Transportation cost per unitby sea$10Inventory carrying cost per year24%service level98%by air$25Formulae used:Conversions used:Weekly demand = Monthly demand * 12/52Weekly demand S.D = Monthly demand S.D * √(12/52) (square root is used since it is standard deviation)Safety factor for area of 98% = 2.054 (calculated using excel function =NORMSINV(0.98))Safety stock week of supplies = safety stock per week/demand per weekTotal cost = Inventory carrying cost + Total transportation cost
Sea freight optionEurope optionsAAAABAQAUAYTotalMonthly meandemand42.3420.215830.12301.24208306.823108.6Monthly S.D of demand32.4203.95624.61168.52204.6103.16244Weakly mean demand9.761538596.969233653.1531.0462971.0769270.85332.754Weakly S.D of demand15.56445797.950392701.97561.32921059.055649.52764Review period T (In weeks)111111Lead Time L (In weeks)555555L+T (weeks)666666√L+T2.44948972.449492.449492.449492.44948972.44949σL+T38.124977239.92856618.4491374.972594.1458121.3174Safety factor k 2.0542.0542.0542.0542.0542.054Safety Stock (per week)78.308702492.813113594.292824.1895328.3755249.186