Inventory Analysis
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- Date Submitted: 04/20/2012 11:50 PM
- Pages: 4
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Large Bakers
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Memorandum
November 22, 2011
To: Management, Large Bakers
From: Greg Gregson, Supply Chain Manager
SUBJECT: INVENTORY DISTRIBUTION ANALYSIS – PROPOSED CHANGES TO THE SUPPLY CHAIN
Background:
As was discussed, a review was performed of the current processes involved in the shipment of flour to our mill. The intent of the review was to determine whether we should change our current INVENTORY MANAGEMENT practices of receiving and processing individual railcars at the rate of approximately 2 cars per day. Discussions with our supplier and the shipping agency indicate that there are likely substantial savings to be realized if alternate shipping practices are adopted that would result in the realization of savings based upon economies-of-scale savings.
While additional explanation of the methodology is provided later, the analysis compared the following two patterns:
* Option 1 - 25 cars per shipment at 14-day intervals with safety stock held for production variation; or
* Option 2 - 25 cars at varying intervals, but with the required extra safety stock.
The analysis involved calculating the cost of shipping using different multi-car shipment sizes and determining the value of associated storage charges. By combining these charges, the analysis resulted in finding a TOTAL COST, which when compared to each other the lowest would form the recommended solution.
Recommendation:
Based upon the analysis that was performed, it is recommended that LARGE BAKER adopts OPTION 1 as their inventory strategy and would therefore realize savings of $84,900 annually.
Enclosed are the details of the analysis that was performed,
Greg Gregson
Benchmark Information:
* Two inventory patterns were analyzed:
* 25 cars per shipment at even intervals with safety stock held for production variation; or
* 25 cars at varying intervals, but without requiring the extra safety stock.
* Regardless of the shipping...
Large Bakers
|
Memorandum
November 22, 2011
To: Management, Large Bakers
From: Greg Gregson, Supply Chain Manager
SUBJECT: INVENTORY DISTRIBUTION ANALYSIS – PROPOSED CHANGES TO THE SUPPLY CHAIN
Background:
As was discussed, a review was performed of the current processes involved in the shipment of flour to our mill. The intent of the review was to determine whether we should change our current INVENTORY MANAGEMENT practices of receiving and processing individual railcars at the rate of approximately 2 cars per day. Discussions with our supplier and the shipping agency indicate that there are likely substantial savings to be realized if alternate shipping practices are adopted that would result in the realization of savings based upon economies-of-scale savings.
While additional explanation of the methodology is provided later, the analysis compared the following two patterns:
* Option 1 - 25 cars per shipment at 14-day intervals with safety stock held for production variation; or
* Option 2 - 25 cars at varying intervals, but with the required extra safety stock.
The analysis involved calculating the cost of shipping using different multi-car shipment sizes and determining the value of associated storage charges. By combining these charges, the analysis resulted in finding a TOTAL COST, which when compared to each other the lowest would form the recommended solution.
Recommendation:
Based upon the analysis that was performed, it is recommended that LARGE BAKER adopts OPTION 1 as their inventory strategy and would therefore realize savings of $84,900 annually.
Enclosed are the details of the analysis that was performed,
Greg Gregson
Benchmark Information:
* Two inventory patterns were analyzed:
* 25 cars per shipment at even intervals with safety stock held for production variation; or
* 25 cars at varying intervals, but without requiring the extra safety stock.
* Regardless of the shipping...