Exam 12: Managing Uncertainty in a Supply Chain: Safety Inventory

Scenario 12.3 - The Cat Café Daily demand for cat litter at the Cat Café in Jones is 1500 ounces with a standard deviation of 300 ounces. The proprietor orders the best cat litter money can buy online, and the average shipping time is 5 days. Of course, if the order is placed at the end of the week, then it may take a while longer to receive the shipment, so the standard deviation of lead time is 2 days. The state health department keeps a close eye on the condition of the Cat Café; a cat-loving inspector visits at least twice a week, ostensibly to inspect, but mostly to pet his favorite Scottish Fold cat named Groundskeeper Willie. -Suppose the café wishes to erase any hint of impropriety and wants to peg their service level at 99%. How many days of safety inventory they should carry?

The lower the coefficient of variation of an item, the greater the reduction in safety inventories as a result of centralization.

The expected shortage per replenishment cycle (ESC) is

What is an explanation offered for why firms have not historically tracked stockouts very well?

Which approach to aggregation requires an information system that allows access to current inventory records from each location?

Which use of common components in a variety of products has been a very effective supply chain strategy to exploit aggregation and reduce component inventories?

For the same safety inventory, an increase in lot size

With periodic review, inventory status is checked at regular intervals and an order is placed to raise the inventory level to a specified threshold.

Given a lot size of Q (which is also the average demand in a replenishment cycle),

Scenario 12.2 - Hamsterdam Marlo Stanfield's operation also uses large quantities of prepaid cell phones, on average 1500 per week with a standard deviation of 145. The lead time for their own brand of prepaid cell phones is three weeks and they have a lot size of 350 phones. To ensure they never run out, they keep a safety stock of 500 phones with Proposition Joe. -What safety stock should be held to put the fill rate at 0.99?

Lead time is the gap between

The expected shortage per replenishment cycle (ESC) is the average units of demand that are satisfied from inventory in stock per replenishment cycle.

The ________ is the average units of demand that are not satisfied from inventory in stock per replenishment cycle.

Discuss the role of safety inventory in the supply chain and the trade-offs involved.

As the uncertainty of supply or demand ________, the required level of safety inventories ________.

Aggregation reduces the standard deviation of demand

In most supply chains, the key to reducing the underlying forecast uncertainty is to link all forecasts throughout the supply chain to customer demand data.

Explain the impact of supplier lead time on safety inventory.

Scenario 12.1 - Charm City Avon Barksdale's operation uses large quantities of prepaid cell phones, on average 500 per week with a standard deviation of 45. The lead time for their own brand of prepaid cell phones is two weeks and they have a lot size of 125 phones. -What is the average flow time of a phone if the reorder point used by Mr. Barksdale is 2000 phones?

Periodic review policies for inventory replenishment require safety inventory to cover demand during