Scribd Logo
Upload

Welcome to Scribd!

  • 0 views

    202402143

    Uploaded by

    coursesmba3

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    202402143

    Uploaded by

    coursesmba3
    0 views7 pages

    Copyright

    © © All Rights Reserved

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    0 views7 pages

    202402143

    Uploaded by

    coursesmba3

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    You are on page 1of 7

    Givenz Information

    High-volume electronic product family, manufactured in Asia, sold


    through major retail chains in NA

    Currently, finished goods supplied by air directly to retailer DCs

    Each retail chain is sourced separately

    Prime question: Should the firm switch from air shipments to ocean
    shipments
    Givenz Data

    Mean Weekly Review


    Product Cost Weekly STD
    Demand Period 1
    $1000 $1400
    $5800 Week

    Ocean Lead Ocean Air Shipping


    Air Lead Time
    Time Shipping Cost Cost
    1 Weeks
    7 Weeks $6.55/box $24.50/box

    Service Level Cost of capital


    95% 13.3%
    Safety Stock
    z Cycle Stock

     The formula for safety stock is:



    • The formula for safety stock is:
    SS=Z×σ× ,
    Where: SS= ,
    • Z=1.645 (95% service level) Where:
    • σ=1400 (weekly standard deviation) • D=5800 (mean weekly demand)
    • L: Lead time
    • T=1 week (review period)
     Air Shipments (L=1):
    • Air & Ocean
    SSAir=1.645×1400×1=2303
    CS = = 2900 units
     Ocean Shipments (L=7):

    SSOcean=1.645×1400× 7≈6093
    Totalz Inventory:

     The formula for safety stock is:

    TI=SS+CS,
    Where:
    • TI: Total inventory
    • SS: Safety stock
    • CS: Cycle Stock
     Air Shipments
    TIAir=2303+2900=5203 units
     Ocean Shipments :
    TIOcean=6093+2900=8993 units
    Holding
    z Cost Shipment Cost


    • The formula for shipping cost is:
    The formula for holding cost is:
     HC=I×C×H , SC=D×Cship ,

    Where: Where:
     I: Total Inventory • D=5800 (mean weekly demand)
    • C=1000 (product cost) • Cship :Shipping cost per box
    • h=0.133 (cost of capital)
    • Air (Cship=24.50)
     Air Shipments :
    SC = 5800×24.5=142,100
    HCAir=5203×1000×0.133= 691,999
    • Ocean (Cship=6.55)
     Ocean Shipments :
    SC = 5800×6.55=37,990
    HCOcean=8993×1000× 0.133= 1,196,069
    Totalz Cost:

     The total cost is the sum of holding costs and shipping costs:
     TC=HC+SC
     Air Shipments:

    TCAir=HCAir+SCAir= $691,999+$142,100=$834,099
     Ocean Shipments:

    TCOcean=HCOcean+SCOcean= $1,196,069+$37,990=$1,234,059
    Recommendation
    z

    Based on the total cost analysis:

    Stick with Air Shipments.


    Reason: Air shipments are significantly
    more cost-effective, saving close to $400,000
    annually.

    You might also like