LOG203: Genuine Parts is a Spare Parts Supplier. The Company Advertises: Inventory Management Assignment, SUSS, Singapore

Question 1

Genuine Parts is a spare parts supplier. The company advertises that it guarantees a service level of 90 percent, for all the parts it carries. It has only one supplier who can deliver the items in 4 weeks. The weekly demand for one of the parts follows the Normal distribution with a mean of 2,000 units. The standard deviation of demand during the lead time is 400 units.

1. Analyse the ordering policy of the company if the ordering cost is $100 per replenishment order and carrying cost is $5 per part per year.
2. The company is considering two new proposals to minimise the out-of-stock situation.

Proposal 1: The Sales Director of the company suggested that the company should use a 95% cycle-service level instead of 90%.

Proposal 2: The Accounts Director argued that a bi-weekly periodic review policy should be followed.

Compare the existing ordering policy with the suggestions proposed by the two directors. How much money can be saved in holding cost for safety stock, if any, for these two proposals?

Question 2

You have played the MonsoonSIM Inventory Game with the objective to maximise your profit by selling different types of juices at various locations. Relate the inventory concepts and models learned in this course and discuss what you would have done differently to improve your performance in the game. State the assumptions required for your analysis. You may include any statistics from the game for your analysis. Mention any limitations that the game may have.

Question 3

Aquasoft sells water purifiers from its only store in Ion Orchard. The record of the sales transactions for the year 2019 is shown in Table 1. The company wants to forecast monthly sales for 2020 based on the sales for water purifiers in 2019.

Table 1: 1 Record of Transactions in 2019

The operations manager is confused about whether to use a moving average or exponential smoothing method for forecasting. Suggest to the operations manager the better method.

In your answer, plot a graph to show the demand over time and comment on the demand pattern. Examine the demand forecast using three- month and four-month moving averages. For exponential smoothing, use a smoothing constant of 0.1 to 0.3 with an initial value of 200 to forecast demand. Show how you derive the forecast and errors of the forecast. Give reasons to support your recommendation.