Redemption

2. The Challenge

The president and CEO of A&T has expressed the opinion that there is too much spare-parts inventory in the system, both at the DC and in the field.

He believes that, inventory can be reduced from its present level at the same time that customer service is improved.

Old Policy:

the DC makes use of a policy

The facilities and sites are mandated by DC management to use a similar policy, where the reorder point is computed as r=u/13, and the maximum inventory level is given by m=u/3, regardless of the usage class .

New Policy:

the DC that takes into consideration lead time, l.

This new policy computes reorder points as:

The maximum inventory level m is computed as before.

For the facilities, reorder points are increased from r=u/13 to r=u/6,

and for the sites,reorder points are increased from r=u/13 to r=u/8.

Maximum inventory levels are unchanged.

Note: for all levels of demand unless it is zero in which case r = -1.

First priority to meet customer standards, and then second lower inventory levels.

The problem, decision makers wanted to improve the fill rate to satisfy higher customer standards and to further reduce inventory levels.

Q3. In order to meet the filling rate of 90%, we modified the coefficient formula of the reorder points of new policy.

Q4.

Q3 uses policy only to meet fill rate 90% , but the order point and inventory level, so the customer service level will be reduced.

From the requirements of the case, hoping to improve inventory levels and further improve customer service levels, and maintain the filling rate of 90% or more.

We can from this policy that often use parts placed in the field, less use parts placed in the DC.

From lower inventory investment, we recommend this considering the lead time of the reorder points.

To improve the inventory level blindly, can satisfy the customer service level. But if you can take into account the amount of usage and lead time, you can avoid too...