SURF SHAPER CASE STUDY PAGE 1 Surf Shaper, a surf warehouse in California, serves over 300 surf shops and retailers along the California coast. Surf Shaper places their boards in surf shops on consignment and replaces the consignment stock from their warehouse as boards are sold, typically within three days. Inventory must be carefully managed. If the retail surf shops run out of Surf Shaper boards before the consignment inventory is replaced, sales may be lost as customers choose other vendors. Surf Shaper may also lose their "shelf space" within the retailer's shop if their supply chain proves unreliable. For this reason, Surf Shaper strives to maintain a 96% service level with their retailers. The best-selling board for Surf Shaper is the Grommet, their 8-foot foam wide board, that is suitable for beginners and casual surfers. The Grommet retails for $400, and COGS is $150 per unit. The popularity of the Grommet has been steadily increasing over the past three years. The unit sales report is displayed below. 2018 2019 2020 January February 790 853 929 800 864 944 March 1,300 1,404 1,544 April 1,560 1,685 1,943 May 1,620 1,750 2,469 June 1,970 2,128 2,584 July 2,140 2,311 2,539 August 2,230 2,408 2,541 September October November 1,070 December Total 1,560 1,685 2,426 1,280 1,382 1,573 1,156 1,271 940 1,015 976 17,260 18,641 21,740 SURF SHAPER CASE STUDY page2 The Grommet is manufactured in Thailand. Orders take 30 days to arrive via sea freight. With the costs of communications, customs, and freight, each order placed incurs an expenditure of $935. Once the boards arrive at the warehouse, the inventory carrying cost is 15% per year/per unit of the COGS. Based on the information provided in this case study, you will create a 2021 inventory plan for Surf Shaper. Using the spreadsheet provided and the formulas you learned and practiced last week: 1. Create a Sales Forecast showing a 15% increase in sales over 2020. 2. Using your 2021 Sales Forecast, determine the amount of Safety Stock Surf Shapers should keep on-hand to meet their service level goal. 3. Utilizing the EOQ method, identify: a. The optimal order quantity (Q) b. The number of orders to be completed c. The Re-Order Point d. Total ordering cost e. Inventory carrying cost f. Safety Stock Carrying cost g. COGS h. Total Cost of the inventory plan A B C D E F G H J K 1 2 2018 2019 2020 Sales Forecast 2021 3 January 790 853 929 January 1,068 Cost per unit Inventory Holding Cost per unit 150 4 February 800 864 944 February 1,086 5 March 1,300 1,404 1,544 March 1,776 Z-score 6 April 1,560 1,685 1,943 April 2,234 7 May 1,620 1,750 2,469 May 2,839 Standard Deviation of Demand Safety Stack 8 June 1,970 2,128 2,584 June 2,972 9 July 2,140 2,311 2,539 July 2,920 EOQ (Q*) 1,441 10 August 2,230 2,408 2,541 August 2,922 Maximum Inventory, (Q* + SS) 11 September 1,560 1,685 2,426 September 2,790 12 October 1,280 1,382 1,573 October 1,809 Average Inventory, (Q*/2) Number of Orders 17 13 November 1,070 1,156 1,271 November 1,462 Re-order Point 2,922 14 December 940 1,015 976 December 1,122 15 Total 17,260 18,641 21,740 Total 25,000 16 17 Total Ordering Cost Inventory Carrying Cost Safety Stock Carrying Cost $16,216 $16,216 $130,105 18 19 20 21 ***The area in yellow that is filled out I got from the link I provied from CourseHeros Q&A section. The area in white was "Given" as part of the assignments information. COGS $3,749,978 Total Cost of Inventory Plan $3,782,410 22