Analysis of Business Operations/Vinyl gloves replenishment scenario
A company consumes a great number of vinyl gloves. These gloves are purchased in 8 versions (SKU’s): small, medium, large, and extra large, in both powdered and powder
free. Because of the volume of consumption, the decision has been made to purchase the gloves directly from the manufacturer in China. Your job as the materials
manager is to determine how to manage the replenishment ordering on these items.
For the purposes of this assignment, assume that a thorough cost analysis has been performed, taking into account increased cost of holding inventory due to the
extended lead time, transportation costs, and increases in required safety stock due to sourcing from an overseas (versus a regional) supplier, and the manufacturer
can provide these items at a lower total cost of ownership. While the holding costs of inventory are going to rise significantly by ordering from the manufacturer, we
want to mitigate this effect as much as practical.
The terms of the contract with the manufacturer are as follows:
Gloves will be purchased in whole container (40′ ocean container) quantities only. A container is 2,600 cases.
Glove orders can contain any mixture of quantities of specific SKU’s, provided the order results in a lot multiple of 2,600 cases.
Two (or more) container loads can be ordered at the same time if desired.
The order lead time will be 60 days (you can use 2 months).
The gloves are issued and consumed by end users in PACKS. However, all orders will be placed using the case unit of measure. There are 10 packs per case.
12 months of historical consumption for each SKU are provided on the “Consumption History” tab of this spreadsheet.
Question 1:
Decide and state whether you will use a fixed-quantity (Q) model, or a fixed-time-period (P) model to manage the replenishment of the gloves.
Question 2:
Assume you are using a Q model and have a 3% out-of-stock risk tolerance (97% certainty).
Calculate reorder point for each SKU using DDLT+SS and a Z-factor that gives you 97% certainty level.
Question 3:
If you are using a P model, what will be your order time period and total quantity in cases?
If you are using a Q model, what is your expected order frequency and total quantity in cases?
Question 4:
Assume you are using a P model and calculate order-up-to level for each SKU.
Question 5:
Your current on-hand quantities are ————————————————————————————————————-> SKU Cases
Place an order for 2,600 cases (1 container load) and specify how many cases of each item will make up the order. 12340001 49
Describe in detail or show in formulas in your spreadsheet how you decided the quantity for each SKU. 12340002 372
12340003 175
12340004 60
12340005 97
12340006 1050
12340007 599
12340008 285
Material Description Consumption quantity in PACKS. There are 10 packs per case.
NOV 13 DEC 13 JAN 14 FEB 14 MAR 14 APR 14 MAY 14 JUN 14 JUL 14 AUG 14 SEP 14 OCT 14
12340001 GLOVES,VINYL,PWDR,SMALL 320 322 215 270 180 310 120 381 217 241 154 340
12340002 GLOVES,VINYL,PWDR,MED 1,485 1,972 1,272 1,382 1,360 1,530 1,312 1,500 1,607 1,599 730 1,140
12340003 GLOVES,VINYL,PWDR,LG 792 1,000 812 711 821 790 674 800 944 869 630 640
12340004 GLOVES,VINYL,PWDR,XL 250 290 190 230 210 280 194 260 306 190 410 160
12340005 GLOVES,VINYL,PF,SMALL 452 412 345 317 353 400 305 385 420 342 250 400
12340006 GLOVES,VINYL,PF,MED 3,730 3,340 2,919 2,730 3,380 3,190 3,410 3,650 4,021 5,532 4,130 4,872
12340007 GLOVES,VINYL,PF,LG 1,822 1,895 1,645 1,422 1,533 1,571 2,205 3,456 1,957 2,531 1,380 1,510
12340008 GLOVES,VINYL,PF,XL 1,367 1,347 1,476 880 1,261 1,119 1,352 1,528 1,176 900 970 1,020
Total 10,218 10,578 8,874 7,942 9,098 9,190 9,572 11,960 10,648 12,204 8,654 10,082
