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

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

For the same safety inventory,an increase in lot size

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

Figure 1: Inventory Profile for Periodic Review Policy -What does the letter C represent in Figure 1?

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 99.5%.What is the level of safety inventory they should carry?

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

The required safety inventory

All inventory between a given stage in the supply chain and the final customer is called the

The expected shortage per replenishment cycle (ESC)is

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

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

A continuous review policy dictates that

Discuss the various measures of product availability.

Periodic review policies require

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

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?

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 expected shortage per cycle under this policy?

When using a continuous review policy,a manager has to account for the uncertainty of demand during the lead time and the review interval.

Figure 1: Inventory Profile for Periodic Review Policy -What does the letter F represent in Figure 1?

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?