HW #1 Spring 2021 Strategic Logistics Management OMGT 4753 Order Management and Customer Service Homework Assignment Due: 11:50 pm, Monday 2/8/2021 Part 1: Financial Impact - Stockouts (Read this information carefully!) Below are supply chain members for two brands of toothpaste: Gleam Teeth and NiceBreath. Assume that customers will always choose "Gleam Teeth" first when purchasing toothpaste and that the profit on this brand is the higher of the two. Using the information below, calculate the total stockout cost for each member of the supply chain and compare the costs of each. Retailer (carries both brands): 10% of customers will accept a backorder (Gleam Teeth) 50% will buy "NiceBreath (same store) 20% will go to a different store (lost sale) 20% will discontinue doing business with the retailer Distributor (carries both brands): 70% of retailers will accept a backorder of "GleamTeeth" 10% of retailers will accept extra shipment of NiceBreath" 15% will use another source (lost sale) 5% will discontinue doing business with the distributor Each backorder costs $50 Each "NiceBreath" purchase costs $10 (lost profit) Each lost sale costs $160 Each lost customer costs $2,500 Each backorder of "Gleam Teeth costs $300 Each extra shipment of NiceBreath costs $50 Each lost sale costs $2000 Each lost customer costs $19,000 Manufacturer for Gleam Teeth: 95% of distributors will accept a backorder 4% will use another source (lost sale) 1% will discontinue doing business with the manufacturer Supplier (supplies to both Manufacturers): "Gleam Teeth" information 60% of the time will accept a backorder 20% of the time uses a second supplier 10% of the time, permanently changes allocation 10% of the time, discontinues doing business with supplier Each backorder costs $500 Each lost sale costs $10,000 Each lost customer costs $95,000 Manufacturer for Nice Breath: 35% of distributors will accept a backorder 40% will use another source (lost sale) 25% will discontinue doing business with the manufacturer Each backorder costs $3,000 Each lost sale costs $8,000 Each lost allocation costs $100,000 Each lost customer costs $2 million (cont. on page 2) Each backorder costs $2500 Each lost sale costs $7000 Each lost customer costs $75,000 HW #1 Spring 2021 Supplier (supplies to both of the manufacturers): "NiceBreath" information 75% of the time will accept a backorder 13% of the time uses a second supplier 7% of the time, permanently changes allocation 5% of the time, discontinues doing business with supplier Each backorder costs $1,000 Each lost sale costs $3,250 Each lost allocation costs $50,000 Each lost customer costs $275,000 Part 2: Financial Impact - Changes in order fill rates Using the information below, calculate the cash flow lost for each of the following fill rate % (i.e. customer service): 75%, 80%, 85%, 90%. Then calculate the difference between the rates. 1,200 units per order (average) 4,000 orders per year Pretax profit per unit = $3 Pretax profit per order = $3600 Invoice deduction per order = $450 Percentage of incomplete orders back-ordered is 78% Backorder costs (per order) = $300 Percentage of incomplete orders cancelled is 22% HW #1 Spring 2021 Strategic Logistics Management OMGT 4753 Order Management and Customer Service Homework Assignment Due: 11:50 pm, Monday 2/8/2021 Part 1: Financial Impact - Stockouts (Read this information carefully!) Below are supply chain members for two brands of toothpaste: Gleam Teeth and NiceBreath. Assume that customers will always choose "Gleam Teeth" first when purchasing toothpaste and that the profit on this brand is the higher of the two. Using the information below, calculate the total stockout cost for each member of the supply chain and compare the costs of each. Retailer (carries both brands): 10% of customers will accept a backorder (Gleam Teeth) 50% will buy "NiceBreath (same store) 20% will go to a different store (lost sale) 20% will discontinue doing business with the retailer Distributor (carries both brands): 70% of retailers will accept a backorder of "GleamTeeth" 10% of retailers will accept extra shipment of NiceBreath" 15% will use another source (lost sale) 5% will discontinue doing business with the distributor Each backorder costs $50 Each "NiceBreath" purchase costs $10 (lost profit) Each lost sale costs $160 Each lost customer costs $2,500 Each backorder of "Gleam Teeth costs $300 Each extra shipment of NiceBreath costs $50 Each lost sale costs $2000 Each lost customer costs $19,000 Manufacturer for Gleam Teeth: 95% of distributors will accept a backorder 4% will use another source (lost sale) 1% will discontinue doing business with the manufacturer Supplier (supplies to both Manufacturers): "Gleam Teeth" information 60% of the time will accept a backorder 20% of the time uses a second supplier 10% of the time, permanently changes allocation 10% of the time, discontinues doing business with supplier Each backorder costs $500 Each lost sale costs $10,000 Each lost customer costs $95,000 Manufacturer for Nice Breath: 35% of distributors will accept a backorder 40% will use another source (lost sale) 25% will discontinue doing business with the manufacturer Each backorder costs $3,000 Each lost sale costs $8,000 Each lost allocation costs $100,000 Each lost customer costs $2 million (cont. on page 2) Each backorder costs $2500 Each lost sale costs $7000 Each lost customer costs $75,000 HW #1 Spring 2021 Supplier (supplies to both of the manufacturers): "NiceBreath" information 75% of the time will accept a backorder 13% of the time uses a second supplier 7% of the time, permanently changes allocation 5% of the time, discontinues doing business with supplier Each backorder costs $1,000 Each lost sale costs $3,250 Each lost allocation costs $50,000 Each lost customer costs $275,000 Part 2: Financial Impact - Changes in order fill rates Using the information below, calculate the cash flow lost for each of the following fill rate % (i.e. customer service): 75%, 80%, 85%, 90%. Then calculate the difference between the rates. 1,200 units per order (average) 4,000 orders per year Pretax profit per unit = $3 Pretax profit per order = $3600 Invoice deduction per order = $450 Percentage of incomplete orders back-ordered is 78% Backorder costs (per order) = $300 Percentage of incomplete orders cancelled is 22%