Estimate the total inventory savings by taking a simple average of savings for the two representative products and applying this average to the 10% of products which have overly high service levels. Assume that these high service level products account for 12% of the 2010 inventory value of $11 million.

Giveen:

% savings of Griffin Breaker=14.2%

% savings of Erienmeyer Flask=17.6%

I know how to calculate simple average saving as the following: Simple average savings=(14.2+17.6)/2=15.9%

Product Griffin Beaker Erlenmeyer Flask Service 99% 99.9% 99% 99.9% Level Z-Value 2.33 3.09 2.33 3.09 Average 54.2/2=27.1 54.2/2=27.1 16.3/2=8.15 16.3/2=8. Weekly 15 Demand Stdev of 21.4/V2=15.1 15.1 10.9/V2=7.7 7.7 Weekly Demand POU R+L=2+1=3 3 3 3 (weeks) Q = (D) * (POU) + 27.1*3+3.09\\/3*1 8.15*3+2.33 V3* 8.15*3+3. (Z)(VPOU) * 5.1=162.1 7.7=55.5 091/3* (stdev of demand per period 7.7=65.7 =27.1*3+2.33V3*15.1=1 42.2 Average 27.1 8.15 8.15 Pipeline average pipeline Inventor = D * L y =27.1*1=27.1 Begin on 162.1-27.1=135 55.5-8.15=47.35 65.7- hand begin on hand 8.15=57.5 = Q - (average pipeline) 5 =142.2-27.1=115.1 SS Z * VPOU * 3.09*v3*15.1=80. 8 2.33*V3*7.7=31. 3.09*V3* (stdev of demand per period 7.7=41. 2 2.33*V3*15.1=60.9 Average (135+80.8)/2=107 (47.4+31.1)/2=3 (57.6+41. On-Hand average on hand .9 9.3 2)/2=4 (begin on hand + SS) 9.4 (115.1+60.9)/2=88 Average 107+27.1=134.1 39.3+8.15=47.5 49.4+8.15 Inventor average inventory =57.6 y = average on hand + average pipeline = 88+27.1=115.1