Visaney I. Angob BSA-4
Questions: 1. Describe the importance of inventory management as it relates to the Farmers Restaurant.
Inventories are vital part of business. Not only they are ne cessary for operations, but they also contribute to customer satisfaction. The inventory management can help restaurant manager to simplify ordering, scheduling and any process regarding the inventory at the level which is stable for the business. In case of Farmers Restaurant the inve ntory management is important especially Kristin, the manager or the business itself has many competitors therefore with proper inventory management they will not lost any an y demands and they will have a stable inventory that could keep up with the demands of customers until new orders would arrive. Kristin may use historical data regarding orders needed with forecasting of sales to lessen t he cost of orders. 2. What ordering system would be b e best for this situation?
For me, because Kristin makes her own ordering system and she has lot of inventory inve ntory in the storage but they only have lesser demand that is why more inventory inve ntory will be wasted if this will continue and also more cost in foods. Therefore, she must use Economic order quantity because it will minimize the sum of the annual costs of holding inventory and ordering inventory that will result to tight control of restaurants inventory and it will lessen up food cost and could balance the demand of the customer. Also, when multiple items come from the same supplier, orders can be discounted and also shipment fee will be lessen due to man y orders with the same supplier. 3.) Given the following information, provide an example of how much Farmers sausage Gravy mix should be ordered. You are doing the order on Thursday. Also, Kristin would like a service level of 95%, and you have found that there is a standard deviation of 3.5 units per week, and a moving average weekly demand of 35 servings. The gravy mix comes in packs of two servings. There are currently three packs in inventory.
Where: D`= average daily or weekly demand = 5 servings/day OI= order interval = 7 days LT= lead time =2 days A= amount on hand = 6 servings 2 servings *3 packs= 6 servings Q=amount to order =? Z= value of service level =1.645 Z= (.9545=1.64;.9545=1.68) Standard deviation = 0.5 =3.5/week /7 = 0.5 per day
Solution: Amount to order
= D`(OI+LT)= zStd.dev.√(OI+LT)- A = 5(7+2)+1.645(.5)√(7+2)-6 = (45+ 2.4675)-6 =47.4675 -6 = 41.4675 OR 42 orders =42÷2 =21 packs Therefore, based on the calculation and information above and the fixed-interval model, Kristin can conclude that the quantity to order that is needed to meet Farmers inventory requirements would be 42 servings So, Kristin would need to order 21 packs o f gravy on the current order to meet expected demand for the coming week. 4.) Given the above information and an on-hand inventory of 12, determine the risk of stock out at the end of initial lead time and at the end of the second lead time. The lead time is 2 days and orders are placed once a week. *Initial Lead-time A=D`*lt +z std.dev.√LT
12=5*2+2(0.5)(√2)
12= 5*2 + z(0.5)(1.414) 12= 10+ .707z 22= .707z Z= 2.83 Percentile = 99.5% Using the table and interpolation: (.9977-.9974)*(2.83-2.800÷2.84-2.80)= 0.000225 2.80=.9974 2.83=.9974+0.000225=.9976 or 99.761% service level Therefore the stock out risk is: 100%-service level =100% - 99.76% = 0.24%stockout risk *End of second lead-time Q= D`(OI+LT)= zStd.dev.√(OI+LT)- A 42= 5(7+2) + z (.5) √(7+2)-12 42= 45+2(0.5)(3)-12 2(.5)(3)=42-45+12 2=9÷1.5 Z=6 Percentile= 100% Therefore the stock out risk is: 100%-100% =0%stockout risk
Based on the computations above, there is a very small chance that they will encounter stock out before the next order arrives. With service level of 99.5 and 100% ,they will not have shortage of stocks, therefore Kristin may consider this in deciding wherein switching to a local supplier.
5.) The supplier Kristin uses is located in Ohio. Why might Kristin consider dealing with a nearby supplier instead of the one in Ohio? What reasons might there be for not switching suppliers?
The location of Farmer’s restaurant is in Wyoming area of Michigan and the suppliers is in Ohio. The distance between the restaurant and the supplier is more than 400km.Kristin must consider the cost of the transportation, the shipment size scheduling and the performance regarding, which supplier to order, how much to order. If the supplier is nearby the chance of having lesser cost could be met. The reason that Kristin would not witch suppliers is that when you have the same suppliers, you can avail discounts of your orders especially when you order a lot also the shipment will lessen because it came from the same supplier. And also, even if the supplier is too far, your lead time is fine and there is a small percentage of having stock out until the new orders arrives.
