Reference no: EM132334703
Assessment
In this assessment item, you are required to critically assess a supply chain decision making problem. The report, which should be no more than 2,000 words, should clear) discuss the findings based on the modeling of the problem at hand.
Please also submit the EXCEL SPREADSHEET(S) you have developed for this assessment item, as they will help clarify an issue that might arise during the marking process.
Background
In this assessment, we will be working on a supply chain decision making problem at the facility level. The management team at MaveriCo is in particular interested in one product, as there were some issues with the product in the past few years.
You were assigned to conduct this task. In order to carry out this exercise, you needed to collect some data for this product. However, when you talked to the IT department at MaveriCo, they replied that there were no records for the product in the system. Now you know why this product was problematic!
Data Collection
You then spoke to your friend Susan in the purchasing office. She helped to get some aggregated data, which were reported every four months, for the past four years, as shown in Table1. She also mentioned that she could not find the past demand forecasts for this product, but cautioned that the demand has been volatile. As a suggestion, she recommended a standard deviation of 6,000 for the annual demand.
You felt more confident with the task. You turned to the latest purchasing order and noted that the unit price for the product was $85 (with delivery included). You then gave a call to the finance department. They told you that on average MaveriCo spent $2,000 to process an order. Once an order was placed, it took two weeks for the supplier to deliver. They also mentioned that MaveriCo's policy dictated 20% for the inventory holding rate.
Update from the Supplier
You were about to start working on your recommendations. Just at this moment, you received an update from your supplier. They advised that there will be a scheduled maintenance for their production line later in the year. They advised that the maintenance
|
Year
|
Month reported
|
Demand
|
|
1
|
1
|
16,500
|
|
1
|
5
|
17,000
|
|
1
|
9
|
18,000
|
|
2
|
1
|
16,300
|
|
2
|
5
|
17,100
|
|
2
|
9
|
17,800
|
|
3
|
1
|
16,600
|
|
3
|
5
|
17,300
|
|
3
|
9
|
17,850
|
|
4
|
1
|
16,850
|
|
4
|
5
|
17,500
|
|
4
|
9
|
18,250
|
Table 1: Demand information over past four years.
usually takes about 15 days to complete. Their past maintenance records suggested that the length of the maintenance follows a normal distribution with a standard deviation of 3 days.
You called the supplier to see what could be done for this maintenance. The reply was very positive. In the past, they were willing to compensate affected customers by ‘depositing' inventory for them to use (hence it had no cost implications for their customers). In your case, they need you to help them find a storage place with a reasonable price.
You contacted a few public warehouses. You received a very attractive quote from one of the service providers. The quote provided enough storage capacity for your need. The service provider also mentioned that if you specify the number of days required upfront, you only pay $1,000 per day; otherwise, you can choose to pay $3,000 per day, using the spot price for any number of days.
Proposed Actions?
You believe by now you have got all the required data and you are ready to start. Your task will need you to use the knowledge acquired in the first intensive teaching block, and document your analysis.
Given the high interest from the management team, you would like to continuously monitor this product over the coming year. As a result, you are thinking about using a continuous review policy for this product. You are also going to suggest a Cycle Service Level (CSL) of 95% due to the attention (hence importance) from the top. For simplicity, you assume there are 52 weeks per year. What should your inventory policy look like?
You would also like to sign a storage contract with the warehouse service provider to give your supplier a reasonable quote. The questions is, should you specify how many days you want right now? and if so, for how many days?
It is advised that you build a model around this project so you can play with different parameters. With the model you should discuss the impact of certain parameter changes (i.e., by trying different values) for factors such as unit cost, inventory holding rate, delivery lead time, etc. Please remember to discuss your findings from a supply chain management perspective.