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Question 2•Compare their system (average inventory of one month demand) to your system (ordering according the fixed time period model with safety stock): what is the difference in annual inventory costs and levels for each product and what is the difference is service level each product. Which is the better system?
Hewlett Packard AssignmentQuestion 3•Evaluate the idea of supply generic printers to the Europe DC and integrating the product by packaging the power supply and the instruction manual at the DC just prior to delivery to the European resellers. Focus on the impact on DC inventory investment in this analysis.
Hewlett Packard AssignmentQuestion 3A AB AU AA AQ AYA AB AU AA AQ AYTLBase CaseYour Model Option 1Generic ProductTLQuestion 3 Compare Base Case to Shipping Generic Products Generic ProductA AB AU AA AQ AYA AB AU AA AQ AYTLOption 2Fly the product at $10 per unit extra. Week 1 2 3 4 5 6Week 1 2 Question 4 Compare Base Case to Shipping All Products By AirPipeline Inventory
Safety Stock Calculation•SS is the safety stock over the exposure period (T+L): 6 weeks. This requires 3 steps: •(1) a calculation to determine the std dev for a one week period (formula 17.7). In this case it is the std dev for the monthly demand/ Square root of 4.33 (there are 4.33 weeks in a month) •(2) a calculation to determine the std dev for a 6 week period. Again see formula 17.7 in the text. In this case it is the std dev of the weekly demand (calculated in (1) above * the square root of 6 ( there are 6 weeks in the exposure period) •(3) multiply the std dev of the exposure period and the z level for 98% availability (2.06) MonthlyWeeklyDemand during EPSafety St.PipelineCycle St.BrandMeanStd devMeanStd devMeanStd devUnitsUnitsUnits(units)(units)(units)(units)(units)(units)(units)(units)(units)A42.3032.409.7715.5758.6138.1478.5748.854.88
Pipeline Units (Stock in Transit) •Pipeline inventory is the inventory which is traveling to Europe. If it takes 5 weeks to get to Europe and if I am shipping 9.77 units every week throughout the year then there is an average of 48.85 units of inventory on the ocean all the time. MonthlyWeeklyDemand during EPSafety St.PipelineCycle St.BrandMeanStd devMeanStd devMeanStd devUnitsUnitsUnits(units)(units)(units)(units)(units)(units)(units)(units)(units)A42.3032.409.7715.5758.6138.1478.5748.854.88
Average Annual Cycle Stock •Cycle stock is a term (vaguely referenced in the text) for order quantity and annual inventory determined by the formula: Q=d(T)•Because you are trying to determine the annual average inventory (not the quantity to order in a given week) Q = d(T) In the HP case, T= one week, so d (demand) must be on the same time terms as T (weeks). Take the annual demand and divide by 52 to get d or the monthly demand and divide by 4.33.