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Given info. for Coffee Company ABC

- monthly demand follows a normal distribution with mean of 1,000 units and standard deviation of 250 units.

- December, where demand randomly falls between 1,500 2,500 units, is an exception.

- alpha = 95%

- The lead-time when Company ABC places an order with its Asian supplier, until the product arrives at the DC, is 8 weeks. Orders are shipped to individual customers using the services of Speedy Post.

PLAN [A]

Software package that helps you predict monthly demand with the following accuracy:

within 120 units, 8 weeks at a time.

PLAN [B]

Switch from ocean transport to air-shipping in LD6 containers (which can hold up to 250 units). This will reduce the order-to-delivery lead-time from 8 weeks down to 2 weeks.

- It takes one week for the supplier to process the order and to make it available for pick-up/shipping. (Hint: the transfer of ownership takes place 1 week after the order has been placed.) - The cost of shipping by ocean is $200 per unit. The cost of shipping by air is $400 per unit.

- Assumed inventory holding cost per year: $750

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Calculate all of the following for both Plans. If something cannot be calculated, JUSTIFY your reasoning.

a) Average Demand during lead time

b) Safety Stock

c) ROP

d) Aggregate Demand

e) Total Inventory Cost

Answer & Explanation Solved by verified expert

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