Presented Presented By : GroupGroup- 3 Abhishek Rai ( 11EX-002) Ayush Kedia ( 11EX-011) Hemant Katyal ( 11EX-021) Kumar Nishant ( 11EX-029) Rajat Joshi ( 11EX-044)
About the Parts Emporium Parts Emporium is a wholesale distributor of automobile parts formed by two mechanics named Dan Block & Ed Spriggs. After 7 years Parts Emporium was relocated to an abandoned warehouse on Chicago South Side. Fifteen years later , parts emporium was the largest independent distributor of auto parts in North central region. Recently Parts Emporium was relocated to a new office with a warehouse space of more than 100,000 square feet. Though the space utilization of warehouse has significantly increased to 90% from earlier 65% but still sales growth was stagnant.
Parts Emporium & Sue McCaskey Sue McCaskey a fresh graduate form one of the prominent Business School has joined Parts Emporium as material manager. She finds inventory at all wrong places. She also finds frequent back orders with excessive lost of sales. In order to bring positive results immediately she decides to concentrate upon two products , EG151 ( Exhaust Gasket) and DB032 ( Drive Belt) Because stock outs are costly relative to inventory holding costs, she recommend a 95% cycle-service level.
Question-1 Put yourself in Sue McCaskey¶s position and prepare a detailed report to Dan Block and Ed Spriggs on managing the inventory of the EG151 and DB032 Ans. ..\OM (version 1).xlsx
Question
2: By How Much do your recommendation for these two items reduce annual cycle inventory , stockout and ordering cost?
Stockout
Surely the lost sales due to back orders are substantial with the current plan and will be much less with the proposed plan. One symptom of such losses is that 11 units are on back order in week 21. A lost sale costs a minimum of $4.16 per gasket (0.32. $12.99). If 10% of annual sales were lost with the current policy, this cost would be $4.16(0.10)(5,304) = $2,206 per year . Such a loss would be much reduced with the 95% cycle-service level implemented with the proposed plan. Cycle Inventory The portion of total inventory that varies directly with lot Size. Average cycle inventory is Lot/2.
Ordering Cost
Recommendation For gasket ± Continuous Review System. EOQ ± 338 and ROL -211 For Belt -- Continuous Review System. EOQ ± 236 and ROL -161
