Question: "I know I gave you those stockout cost figures. To be honest, I wonder if they're too high. On average, how would order quantities, safety stocks, in-stock rates, fill rates, and total costs change if we assumed that per-unit stockout costs were 10% lower than initially assumed?"
(Note: you do not need to provide numerical answers here. Simply explain [in plain English] in what direction and why order quantities, safety stocks, in-stock rates, fill rates, and total costs change in this case.)
SKU 420 1,240 160 $ 3,870 430 0.04 0.01 538.00 22% 1,250 48.00 134 154.80 75 0.05 0.01 $ 1,295.00 22% $ 1,250 $ 104.00 28 21.00 8 $ $ 2 Avg. annual demand 3 Std. deviation of annual demand Average lead time (in years) 5 Std. deviation of lead time (in years) Unit cost ($) 7 Holding cost factor (%/year) Order placement cost ($/order) 9 Stockout cost ($/unit, estimated) Order quantity (units/order placement) 11 Average lead time demand 12 Std. deviation of lead time demand 13 In-stock rate (alpha) 14 Std. normal variate (z) 15 Safety stock 16 Expected stockout quantity/cycle (n(R)) 17 Fill rate (beta) 18 Cycle stock holding cost ($/year) 19 Order placement cost ($/year) Safety stock holding cost ($/year) 21 Stockout costs ($/year) 22 Total logistics costs ($/year) 10 A 10,520 2,320 0.12 0.03 $ 429.00 $ 22% $ 1,250 $ $ 47.00 $ 6,904 1,262.40 863.42 99.46% 2.55 2,200 1.49 99.98% $1,480,870 $ $ 1,905 $ $ 484 $ $ 107 $ $1,483,365 $ 0.08 0.01 845.00 22% 1,250 64.00 61 99.20 46.92 99.98% 3.59 94.31 4,760 980 1,080 220 0.08 0.05 0.02 0.01 389.00 $ 1,106.00 $ 22% 22% 1,250 $ 1,250 $ 38.00 $ 93.00 $ 175 47 380.80 49.00 319.96 50.16 99.98% 99.99% 3.52 3.69 1,127 185 0.02 0.00 99.99% 100.00% 34,026 $ 26,029 $ 34,011 $ 26,026 $ 248 $ 41 $ 18 $ 3 $ 68,303 $ 52,098 $ 17.29 99.98% 3.60 99.99% 3.63 63 340 168 0.00 0.00 100.00% 36,076 $ 36,071 $ 75 $ 5 $ 72,227 $ 0.00 100.00% 25,591 25,590 37 100.00% 18,438 $ 18,437 $ 14 $ 1 $ 36,890 $ 20 3 51,221 2 SKU 420 1,240 160 $ 3,870 430 0.04 0.01 538.00 22% 1,250 48.00 134 154.80 75 0.05 0.01 $ 1,295.00 22% $ 1,250 $ 104.00 28 21.00 8 $ $ 2 Avg. annual demand 3 Std. deviation of annual demand Average lead time (in years) 5 Std. deviation of lead time (in years) Unit cost ($) 7 Holding cost factor (%/year) Order placement cost ($/order) 9 Stockout cost ($/unit, estimated) Order quantity (units/order placement) 11 Average lead time demand 12 Std. deviation of lead time demand 13 In-stock rate (alpha) 14 Std. normal variate (z) 15 Safety stock 16 Expected stockout quantity/cycle (n(R)) 17 Fill rate (beta) 18 Cycle stock holding cost ($/year) 19 Order placement cost ($/year) Safety stock holding cost ($/year) 21 Stockout costs ($/year) 22 Total logistics costs ($/year) 10 A 10,520 2,320 0.12 0.03 $ 429.00 $ 22% $ 1,250 $ $ 47.00 $ 6,904 1,262.40 863.42 99.46% 2.55 2,200 1.49 99.98% $1,480,870 $ $ 1,905 $ $ 484 $ $ 107 $ $1,483,365 $ 0.08 0.01 845.00 22% 1,250 64.00 61 99.20 46.92 99.98% 3.59 94.31 4,760 980 1,080 220 0.08 0.05 0.02 0.01 389.00 $ 1,106.00 $ 22% 22% 1,250 $ 1,250 $ 38.00 $ 93.00 $ 175 47 380.80 49.00 319.96 50.16 99.98% 99.99% 3.52 3.69 1,127 185 0.02 0.00 99.99% 100.00% 34,026 $ 26,029 $ 34,011 $ 26,026 $ 248 $ 41 $ 18 $ 3 $ 68,303 $ 52,098 $ 17.29 99.98% 3.60 99.99% 3.63 63 340 168 0.00 0.00 100.00% 36,076 $ 36,071 $ 75 $ 5 $ 72,227 $ 0.00 100.00% 25,591 25,590 37 100.00% 18,438 $ 18,437 $ 14 $ 1 $ 36,890 $ 20 3 51,221 2
