Gadge-Go, a gadget specialist national retailer, is about to spend big on advertising for its new "One-Tool- Caker (a cake maker). This tool, produced by a specialty factory in Cambodia, is an all-in-one chopper/splicer/ dicer/ shredder/ masher/ stirrer/folder/ smoother / piper. What kitchen wouldn't need one? Gadge-go anticipates strong demand, at least for the first year. Because the company takes orders by telephone only (and these customers won't tolerate delays), inventory must be on hand ready for shipment. From past experience, Gadge-Go has provided you with the following data about product expectations for year 1: > Daily average customer sales (normal distribution - 365 days) 167 Daily sales variation (as standard sales deviation): 29 Time required from factory order to arrival (days): 36 > Cost of placing a factory order (translator, contract exchange): $127 Opportunity cost of capital (annual): 14% "One-Tool- Caker" value $23.50 Required service level 75% (company standard) 1. Recommend to Gadge-go an order quantity and reorder point for the One-tool-caker based on a continuous review system for year 1. (30 marks) 2. For results in Part 1, provide an explanation for the method used to calculate the z-score. Is the safety stock level adequate? Why or why not? (10 marks) 3. Gadge-go wishes to compare results in Task 1 with a periodic review system. What review period and target inventory period would you recommend? Has the safety stock level now changed, and if so, why? (30 marks) 4. Make a recommendation for the inventory control system used by Gadge-go under the assumption that the One-Tool-Caker is class A product early in the lifecycle (year 1) and falls to class C product later (year 2) as new more advanced products become available. (10 marks) 5. Explain in detail the characteristics of the system recommended in Part 4 and the rationale for its implementation. (20 marks) Gadge-Go, a gadget specialist national retailer, is about to spend big on advertising for its new "One-Tool- Caker (a cake maker). This tool, produced by a specialty factory in Cambodia, is an all-in-one chopper/splicer/ dicer/ shredder/ masher/ stirrer/folder/ smoother / piper. What kitchen wouldn't need one? Gadge-go anticipates strong demand, at least for the first year. Because the company takes orders by telephone only (and these customers won't tolerate delays), inventory must be on hand ready for shipment. From past experience, Gadge-Go has provided you with the following data about product expectations for year 1: > Daily average customer sales (normal distribution - 365 days) 167 Daily sales variation (as standard sales deviation): 29 Time required from factory order to arrival (days): 36 > Cost of placing a factory order (translator, contract exchange): $127 Opportunity cost of capital (annual): 14% "One-Tool- Caker" value $23.50 Required service level 75% (company standard) 1. Recommend to Gadge-go an order quantity and reorder point for the One-tool-caker based on a continuous review system for year 1. (30 marks) 2. For results in Part 1, provide an explanation for the method used to calculate the z-score. Is the safety stock level adequate? Why or why not? (10 marks) 3. Gadge-go wishes to compare results in Task 1 with a periodic review system. What review period and target inventory period would you recommend? Has the safety stock level now changed, and if so, why? (30 marks) 4. Make a recommendation for the inventory control system used by Gadge-go under the assumption that the One-Tool-Caker is class A product early in the lifecycle (year 1) and falls to class C product later (year 2) as new more advanced products become available. (10 marks) 5. Explain in detail the characteristics of the system recommended in Part 4 and the rationale for its implementation. (20 marks)
