REPLENISHMENT & SAFETY STOCK STUDY CASE Consider the following scenario: The Supply Manager in a "widget" manufacturing company operating in a Make-To-Stock environment, decided to review its inventory position after a discussion with the company's Controller, who expressed that the company had way too much purchased material inventory and was negatively impacting the company's cash flow. The Supply Manager requested the Purchasing & Materials group to review the 3 highest dollar purchased items and verify their purchasing and inventory practices and if their safety stocks were properly set. Demand for these materials had been reasonably stable" and was anticipated to continue that way, Purchasing placed orders for materials and components to suppliers to cover requirements on a weekly basis and the company operates in a 5-day week schedule. The Supply Manager's staff presented the following information High Runner Purchased Parts PART NO.141 PART NO. CCC PART NO. 282 Price per Unit $ 500 USD $ 25 USD $ 1800 USD Daily Requirements 3500 pcs 24000 pcs 1000 pcs Current Planned Safety Stock in Pes 1000 pcs 60,000 pcs 1.000 pes Current On-Hand Inventory in Pes 1000 pcs 90,000 pcs 3000 pcs Providing Vendar Delivery Performance 85% of Orders On-Time 98% of Orders On-Time 90% of Orders On-Time Average Vendor Order Recovery when fate in Days Vendor Lead Time 10 working days I working days 5 working days 2 7 ? ESTABLISHING THE CURRENT INVENTORY PLAN (25 points) Question No. 1. - What average inventory for each part number in pieces and dollars should the company have with current ordering practices (lot-size inventory) and planned buffer stock levels? How much total average planned inventory should the company have on these three part numbers? Fill in missing figures in table to calculate PART NO. 141 PART NO. CCC PART NO. 2B2 Unit Price $ 500 525 $ 1800 Order atv (Weekly Requirements) in Pieces 17.500 Average Inventory in Pieces (17,500/2) = 8,750 ? Averape Inventory in Dollars 18.750 x $ 500) = $4,375,000 Current Planned Safety Stock in Pieces 1000 pes 60,000 pcs 1,000 pcs Current Planned Safety Stock in Dollars 11.000x5500) - $ 500,000 7 Average Planned Inventory in Pieces 9,750 pcs Average Planned Inventory in Dollars 154.375 + 5 500 KI = 54.875K Tips for this study cow.consider the personvertory Order Gartly/2 (codd be in pieces of dollars Total Avg. Planned Inventory (Pes) Average Panned Inventory wrap wentary Safety Stock could be in pieces odeurs Total Avg Planned Inventory ($) Total Average Planned Inventory in dollars Save Part TALIS) AVEI. Part CAv In Part 252 2 ? 7