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

Aggregation reduces the standard deviation of demand only if demand across the regions being aggregated is not perfectly positively correlated.

As retailers decrease the level of safety inventory they carry, the distributor will have to

Weekly demand for corn tortillas at Big Truck Tacos is normally distributed with a mean of 1500 and a standard deviation of 300. Marco's takes one and one half weeks to supply a Big Truck order. Big Truck is targeting a CSL of 95 percent and monitors its inventory continuously. How much safety inventory of corn tortillas should Big Truck carry? What should their ROP be?

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 expected shortage per cycle at 5 phones?

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

Weekly demand for 12" hot dogs at Mutt's Amazing Dogs is normally distributed with a mean of 2850 and a standard deviation of 425. The store manager continuously monitors inventory and currently orders 500 hot dogs each time the inventory drops to 6000 frames. The manufacturer currently takes two weeks to fill an order. How much safety inventory does the store carry?

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 is the fill rate under this policy?

Postponement allows the supply chain to delay product differentiation, which results in disaggregating most of the inventories in the supply chain.

A distributor should decide his safety inventory levels based on

The appropriate level of safety inventory is determined by the uncertainty of both demand and supply and the desired level of cycle inventory.

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 is the standard deviation of demand during lead time?

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 standard deviation of demand during their lead time?

The fraction of product demand that is satisfied from product in inventory is the

Cycle inventory is inventory carried to satisfy demand that exceeds the amount forecasted for a given period.

The required safety inventory

For the same safety inventory, an increase in lot size increases the fill rate but not the cycle service level.

Safety inventory is carried because

The required safety inventory

A goal of any supply chain manager is to

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. -Suppose Mr. Barksdale sets his reorder point at 1100 phones. What is his average cell phone inventory?