Inventory Management and SOP
Perform the following tasks
1– Determine the planned inventory for the next year’s SOP for each month such that it protects the firm from possible shortages while keeping in mind that carrying
inventory is not free!
a. Which probability distribution did you use?
b. Why it’s safe to use it?
c. Which theorem from statistics supports your reasoning?
2– Develop the required SOPs for next year for each product family. Compare –only for one product family– between chase and level strategies. Which one is cheaper?
Assume the following
a. Product price as in the Excel sheet.
b. Hiring cost is $200 per employee
c. The firing cost is $500 per employee
d. Inventory carrying cost is 2% of the inventory value.
e. Use the planned inventory you found in part task 1.
f. Assume there is no on–hand inventory for each product family as follows
• Beds: 500
• Kitchen: 150
• Chairs: 1500
g. Assume that the employee productivity for each product family is as follows
• Beds: 4 units/day
• Kitchen: 2 units/day
• Chairs: 10 units/day
