Operations Management: Processes and Supply Chains (12th Edition) (What's New in Operations Management)
12th Edition
ISBN: 9780134741062
Author: Lee J. Krajewski, Manoj K. Malhotra, Larry P. Ritzman
Publisher: PEARSON
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Chapter 12, Problem 8P
Dogs-R-Us and K-9, Inc. are two retail stores that cater to the needs of dog owners in the greater Charleston area. There is healthy competition between these two establishments. Both operate 52 weeks a year and both sell approximately the same type and dollar value of items. Table 12.4 provides the cost of goods sold, the average inventory level, and unit value of each item sold in the two stores.
- Compare the two retail stores in terms of average aggregate inventory value.
- Compare the two retail stores in terms of weeks of supply.
- Compare the two retail stores in terms of inventory turnover.
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The following table shows financial data (year 2009) for two US retailers: Save-A-Lot Retailers and Wally’s Mart.
Assume that both companies have an average annual holding cost rate of 20% (i.e. it costs both retailers $2 to hold an item for one entire year that they procured for $10). *Refer to attached image*
How much lower, on average, is the inventory cost for Save-A-Lot compared to Wally’s Mart of a household cleaner valued at $50 COGS? Give your answer in terms of dollars. Assume that the unit cost of the household cleaner is the same for both companies and that the price and the inventory turns of an item are independent.
Retailers Warehouse (RW) is an independent supplier of household items todepartment stores. RW attempts to stock enough items for a 98 percent serviceprobability.A stainless steel knife set is one item it stocks. Demand (2,400 sets peryear) is relatively stable over the entire year. Whenever new stock isordered, a buyer must assure that numbers are correct for stock on handand then phone in a new order. The total cost involved to place an order isabout $5. RW figures that holding inventory in stock and paying forinterest on borrowed capital, insurance, and so on adds up to about $4holding cost per unit per year.Analysis of the past data shows that the standard deviation of demandfrom retailers is about four units per day for a 365-day year. Lead time toget the order is seven days.a. What is the economic order quantity?b. What is the reorder point?
Mattress Wholesalers, Inc. is constantly trying to reduce inventory in its supply chain. Last year, cost of goods sold was $7.46 million and inventory was $1.52 million. This year, costs of
goods sold is $8.64 million and inventory investment is $1.61 million.
a) What was its weeks of supply last year?
Inventory
Inventory
=
Sales per Week Cost of Sales/52 Weeks
Weeks of Supply=
-
b) What is its weeks of supply this year?
Inventory
Inventory
Sales per Week Cost of Sales/52 Weeks
c) Is Mattress Wholesalers making progress in its inventory reduction effort?
Since the number of weeks that cover the supply has
Weeks of Supply =
10.60 (round your response to two decimal places).
=
9.69 (round your response to two decimal places).
F
Mattress Wholesalers is making
in its inventory-reduction effort.
Chapter 12 Solutions
Operations Management: Processes and Supply Chains (12th Edition) (What's New in Operations Management)
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