Quantitative Practice Problems on GAP's Supply Chain Management

If the company decided to sell the new product at price of D.Cr. 8.20, that means the full fixed expense of 1.20 is covered and the company will make high profit. However, the selling price of D.Cr. 8.20 is very high and under this price the company will sell the new product at a lower volume than what the company planned sale volume in the budget and that will affect the company in the market as a strong competitor in the food manufacturing. According to the case, the company sales volume drop to 30 tons when the product was sold at the price of D.Cr. 8.2. Thus, my recommendation are as follows:

Research two (2) manufacturing or two (2) service companies that manage inventory and complete this assignment.

Compute the projected profit for the order quantities suggested by the management team under three scenarios: worst case in which sales = 10,000 units, most likely case in which sales = 20,000 units, and best case in which sales = 30,000 units.

4. a. The optimal stocking quantity is 409 according to the spreadsheet in the simulation, which is a decrease from 516 in problem #3 because in the event that the Express stocks out, Ralph still makes a profit from 40% of customers who will buy the Private. Therefore, because he makes more profit off of the Private, his risk decreases because of cost of understocking of the Express.

Question 4: Take into account the answer to question 1 and the supplier’s new policy outlined in question 2 and the warehouse’s new policy in question 3. Then determine Low’s new EOQ.

Reorders are placed at the time of review (T), and the safety stock that must be reordered is:

We decided to decrease the price of mountain bike production from $134 per bike to $108. The difference of $26 for 11,000 units results in a saving of almost $300,000. In the meanwhile, we also decided to dump our finish goods inventory, incurring a loss of $175,000. We decided to increase our capacity from 20,000 to 27,500 and efficiency from 1,000,000 to 2,000,000. We want to avoid increasing capacity significantly in order to avoid low efficiency. At the same time we want to keep our wastage at a minimum. We reduced our retail margin for the bike and sports store to 20% while reducing the discount stores to 27%. These new retail margins

The calculations required for question 1 are not massive (it takes more thinking than pencil‐pushing). Working those calculations will help solidify your understanding of the relationship between inventory and cost of goods sold in a manufacturing company. You’ll know you’re on the right track if you conclude that the answer to part b(3) is “no effect.”

C. Using a table to compare the difference between problem #1 and problem #2, respectively, we can see the obvious differences between the optimal stocking quantity and daily expected profit figures.

30. The manager of the local National Video Store sells videocassette recorders at discount prices. If the store does not have a video recorder in stock when a customer wants to buy one, it will lose the sale because the customer will purchase a recorder from one of the many local competitors. The problem is that the cost of renting warehouse space to keep enough recorders in inventory to meet all demand is excessively high. The manager has determined that if 90% of customer demand for recorders can be met, then the combined cost of lost sales and inventory will be minimized. The manager has estimated that monthly demand for recorders is normally distributed, with a mean of 180 recorders and a standard deviation of 60. Determine the number of recorders the manager should order each month to meet 90% of customer demand.

I have taken it upon myself to test two inventory management systems and have found a system that will yield the least cost to Parts Emporium Inc. The two systems I have tested are the Continuous Inventory System and the Periodic Inventory System. Using data that I have gathered from the products DB032 and the EG151, I have compiled calculations and have concluded a continuous inventory system would be best for our corporation. Attached you will find said calculations; I would like to take this moment and present the continuous inventory system and recognize all of the relevant costs. The following is an explanation of each calculation under the continuous inventory system:

An effective supply chain is the key to creating business value, and with expansion on the horizon. Good planning and willingness to adapt to changes are key to maximizing our results. In order to do this we have come up with a plan that will make Lady Americana mattresses a household name in our target expansion markets. In the state of Oklahoma, Lady Americana has already become a brand that has a bed in almost every home. The current systems in place are effective for todays operations, below are some challenges and recommendations to improve upon this to create an effective supply chain, that will grow with you as your business does.

Problem #2.” (To make your life easier, optimal stocking quantity, Q, is computed by the

Since the expected demand is 2000, thus, the mean µ is 2000. Through Excel, we get the z value given a 95% probability is 1.96. Thus, we have: z= (x-µ)/ σ=(30000-20000)/

4. In a service supply chain, the (explicit) cost of information is higher than in a product