Easy-Brew Coffee Inc.

Case: Easy-Brew Coffee Inc. is an e-tailer, shipping from a single Vancouver-based warehouse, which sells single-brew coffee machines exclusively in the Canadian market. (Easy-Brew competes directly with Keurig and Tassimo.) The industry is fast-moving in that models with new features and/or cosmetics are released every 12-18 months. In order to keep manufacturing costs low, Easy-Brew negotiated a lease with an Asian manufacturer to provide adequate production for the foreseeable future. Also in the spirit of managing costs, Easy-Brew transports product from Asia to Vancouver by ocean transport in TEU containers. One TEU container can hold up to 1,000 coffee machines. The lead-time from when Easy-Brew places an order with its Asian supplier, until the product arrives at the DC, is eight weeks. Orders are shipped to individual customers using the services of Canada Post. The math geek sales analyst has determined that the "monthly" (by "monthly" we mean a four week period) 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. The daughter of the Easy-Brew CEO recently attended an introductory workshop on supply chain management. At Thanksgiving dinner she suggested that she had some ideas that might be useful for Easy-Brew to pursue.

Proposal #1: Purchase a demand forecasting software package. Using a sample of historical Easy-Brew demand data, it was determined that a decent package will be able to predict monthly demand with the following accuracy: - within 200 units eight weeks into the future. Proposal #2: 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 eight weeks down to two weeks.

INFORMATION provided by the Finance Department: - INCO terms on supplier purchases are EXW (Ex-Works). It takes one week for the supplier to process the order and to make it available for pick-up/shipping. (the transfer of ownership takes place one week after the order has been placed.) - The company assumes an inventory holding cost of 18% p.a. - The cost of shipping by ocean is $1.00 per unit. The cost of shipping by air is $2.80 per unit.

NEW INFORMATION: - The Executive team wants a minimum service level of 95%.

Use the SCOR framework in your response. Provide an analysis (operational and financial) of each of the two proposals. Quantify your analysis when possible.

Based on your analysis (including operational and financial implications), recommend either:

Please show me the Analysis (Operational and Financial) on excel with formulas.