Managers at a consumer product company, ABC General, are currently debating how to Set the most...

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General Management

Managers at a consumer product company, ABC General, arecurrently debating how to Set the most cost effective competitivecustomer service levels for a new brand EL SKIMOS. The Accountingmanager has suggested 5 days of sales as safety stock. TheMarketing manager has argued for 15 days, while theoperations/manufacturing manager Seeks a compromise level of 10days. The General Manager wants your specific Recommendation withjustification and supporting quantitative analysis.
Here are some relevant information about EL-SKIMOS to help youin your analysis:
Average daily demand during lead time =15 units /day
Standard deviation of daily demand = 2 units
Average replenishment time =7 days
Standard deviation of replenishment time = 3 days
Typical order quantity = 100 units
What is your analysis of the inventory system at ABC. Includeyour estimates for average inventory, safety stock and reorderpoint)?
What are your specific recommendations regarding the inventorysystems at ABC?

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3.9 Ratings (725 Votes)

Average Replenishment Lead Time LTbar 7 daysAverage daily demand during Lead Time dbar 15 units perdayStandard deviation of daily demand d 2 unitsStandard deviation of Replenishment Lead Time LT 3 daysHere both demand and lead time are varyingCase 1 Suggestionof Accounting ManagerSafety Stock 5 days of sales 5 x 15 See Answer

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