2 Inventory in Europe EU needs to be raised even further to maintain

2 inventory in europe eu needs to be raised even

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HP's distribution centers are filled with pallets of the DeskJet printer. 2. Inventory in Europe (EU) needs to be raised even further to maintain satisfactory product availability. 3. Determine the right level of inventory (best safety stock amount) and provide high level of service is a big challenge. 4. Safety Stock policy should be revisited due to increasing difficulty of getting accurate future forecasts Data Provided in case Europe Options NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT A 80 - 60 90 21 48 - 9 20 54 84 42 AB 20,572 20,89 5 19,25 2 11,052 19,864 20,316 13,336 10,57 8 6,096 14,496 23,712 9,792 AU 4,564 3,207 7,485 4,908 5,295 90 - 5,004 4,385 5,103 4,302 6,153 AA 400 255 408 645 210 87 432 816 430 630 456 273 AQ 4,008 2,196 4,761 1,953 1,008 2,358 1,676 540 2,310 2,046 1,797 2,961 AY 248 450 378 306 219 204 248 484 164 363 384 234 TOTAL 29,872 27,00 3 32,34 4 18,954 26,617 23,103 15,692 17,43 1 13,405 22,692 30,735 19,455 Hp Deskjet Demand Data
Cost per Unit (C) = $250 Carrying cost = 12% - 60 %; using 25% from Cost per Unit Safety stock probability = 0.98 Lead Time = 5 Weeks (with sea fright) = 1 Week (by Air) Transportation cost = $8 (by sea) = $24 (by Air) Monthly mean and standard deviation for different options in Europe Europe Options Monthly Mean Values Standard Deviation demand A 42 32.41305386 AB 15,830 5624.578602 AU 4,208 2204.583119 AA 420 203.9268288 AQ 2,301 1168.493345 AY 307 103.122904 TOTAL 23,109 6243.960157 Average Monthly Demand = 23,109 units Annual Demand = 277,302 units Annual Cost = $69,325,750 (277,302 units x $250) Inventory carrying cost = $17,331,375 (277,302 units x $250 x 25%) Safety stock probability = 0.98 Z value = 2.10
Now let us calculate the safety stock, where, α is the service level, and is the inverse distribution function of a standard normal distribution with cumulative E(L) and are the mean and standard deviation of lead time.

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