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Small Tutorial (WG)Exercise 5
1. What are the pros and cons of the various measures of product availability?
Pros: Product and order fill rate show how well the current inventory can take care of the
demand. It shows how many customers they can handle and how many are lost to
competitors. Cycle service level shows how well the replenishment cycles are timed given the
amount of lead time and demand.
Cons: Order fill rate can include multiple products, which all have different product
availability. This can give a wrong picture of the actual fill rates of the different products.
With cycle service levels, even if one customers demand is not being met, the rate goes
significantly down, while this may not have that much of an influence on the overall product
fill rate.
2. “It is well-known that inventory aggregation could always reduce demand
uncertainty and therefore result in a reduction in required safety inventory level.”
Do you agree or disagree, why?
Disagree, there is only reduced ss if it is not perfect positively correlated.
Know how to calculate with correlation p.
3. A new technology allows books to be printed in ten minutes. Barnes & Noble has
decided to purchase these machines for each store. They must decide which books
to carry in stock and which books to print on demand using this technology. Do
you recommend it for bestsellers or for other books? Why?
They should carry items with a steady demand, so the bestsellers. The books with lower
demand should be used for this technology, since these aren’t purchased that often. Thus, the
holding costs would be too expensive for these to carry in stock.
4. Exercise 10 chapter 12
China manufacturer For a CSL of 99%, you need a safety inventory of = 6580.
Local manufacturer For a CSL of 99%, you need a safety inventory of = 2326.
(6580 * 20.000 * 0.25) – (2326 * 20400 * 0.25) – difference in material costs = 21.037.400 - mc
Thus, he should switch to a local manufacturer.
Total cost = purchase cost + holding cost + order cost.
5. Exercise 15 chapter 12
9305 + 10235 + 11166 + 6513 + 7444 + 3722 = 48.385 of safety inventory in Europa with a CSL of
95%.
Saving of safety inventory, since the ss can function as ss for all of Europe making it possible to lower
it.
Benefit of aggregating is only there if they are not fully correlated.
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