HP_DeskJet_Printer_Supply_Chain_Case_Sol.docx - HP DeskJet Printer Supply Chain Case Solution For fulfillment of the course on Operations Management by

# HP_DeskJet_Printer_Supply_Chain_Case_Sol.docx - HP DeskJet...

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HP DeskJet Printer Supply Chain Case Solution For fulfillment of the course on Operations Management by Group 1 Akshay Soni, 1511077 Mohan Raj, 1511103 Rupsa Dasgupta, 1511120 Sachin, 1511122 Vanshraj Roy, 1511140 Under the guidance of Prof. Jishnu Hazra Post Graduate Program in Management Indian 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 option Europe options A AA AB AQ AU AY Total Monthly mean demand 42.3 420.2 15830.1 2301.2 4208 306.8 23108.6 Monthly S.D of demand 32.4 203.9 5624.6 1168.5 2204.6 103.1 6244 Weakly mean demand 9.7615385 96.96923 3653.1 531.0462 971.07692 70.8 5332.754 Weakly S.D of demand 15.564457 97.95039 2701.97 561.3292 1059.0556 49.52764 Review period T (In weeks) 1 1 1 1 1 1 Lead Time L (In weeks) 5 5 5 5 5 5 L+T (weeks) 6 6 6 6 6 6 √L+T 2.4494897 2.44949 2.44949 2.44949 2.4494897 2.44949 σ L+T 38.124977 239.9285 6618.449 1374.97 2594.1458 121.3174 Safety factor k 2.054 2.054 2.054 2.054 2.054 2.054 Safety Stock (per week) 78.308702 492.8131 13594.29 2824.189 5328.3755 249.186