Reference no: EM132202230
In your analysis, include two different approaches to inventory management. What are the pros and cons of each system you analyzed? If using Wild Dog Coffee Company, the following provides additional information you have gathered from the inventory management analysis:
Since Wild Dog Coffee Company is small, the company must manage inventory very carefully. While larger companies can have lots of inventory on the shelf, Wild Dog simply does not have the cash to do that. As such, you have a number of pressures for small inventories. Wild Dog does not have the ability to store a lot of beans, to cover the cost of capital, or to withstand unnecessary expenditures for taxes, insurance, and shrinkage. Shrinkage is important because roasted espresso beans only maintain their optimal freshness for two weeks.
Demand is approaching 1,400 pounds of espresso beans per month.
Only one type of espresso bean is stocked.
Demand is not constant on a daily or weekly basis.
If you run out of espresso beans at any point, you will have to close the business until the next shipment of beans arrives.
Espresso beans are shipped in 25-pound packages. (This is your base inventory unit.)
The cost per pound of beans averages $9.00.
Espresso beans are delivered seven (7) days after placing the order and on any day of the week.
Shipping is free on orders over $250. Otherwise, shipping is $19.95 per order, regardless of weight. (This is the only ordering cost you incur.)
Holding costs are 10 percent/year/unit.
Standard deviation for daily demand is 1.84 pounds.