determine amount of safety stock for company, Marketing Management

Forester's Country Markets is a well-known grocery chain based in a large Midwestern city.  At one of Forester's distribution warehouses a key problem has been proper stocking of salmon for sale in the meat/seafood departments of several Forester's stores.  To better understand this problem the buyer has assembled data on weekly demand (at the warehouse level in pounds) for salmon over the past 40 weeks.  That data is given in the table below.


 The salmon is delivered to the distribution warehouse by refrigerated truck and arrives from the vendor frozen in 50-pound boxes.  It's held frozen at the warehouse and sent to retail stores as needed where it's thawed, processed into different cuts or used in-store to make salmon mousse or stuffed with a crab meat mixture for sale as a ready-to-cook entrée.  Ordering costs are high owing mostly to the cost of transporting the frozen product.  Placing an order with the vendor incurs a fixed $1000 charge, and the vendor faithfully requires one week to deliver an order of salmon.  Though the amount is difficult to estimate accurately, Forester's assigns a $85 annual cost for holding a 50-pound box of frozen salmon at the warehouse for one year.

a. Determine amount of safety stock in boxes of salmon needed at the distribution warehouse to support a 99% service level.

b. If EOQ is used to set the size of orders placed with the vendors how often (on average) will orders be placed?

Posted Date: 2/19/2013 2:15:51 AM | Location : United States

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