Logistics and Supply Chain Management

Questions: 1. Case Fill Rate2. Safety Stock and Average Inventory3. Inventory Carrying Cost and Fill Rate4. Impact on inventory and Service Answers: Introduction Logistics is often referred to as the activities, which occurs inside the organization whereas supply chain entails a series of activities that can be carried out through a network of companies working together in a coordinative manner for delivering the product into the market. All the individual perspectives including the right product, customer, quantity, condition and right place plays a very significant role in the effective operation of logistics (SupplyChainOpz, 2016). 1. Case Fill Rate Case fill rate is defined as the amount of cases of the products, which are to be shipped on the first shipment by the manufacturer with respect to the cases ordered by the company (Sople, 2012). The case fill rate can be calculated by finding out the ratio between the amount of cases shipped on the initial order and the total number of cases ordered (Grocery Manufacturers Association, 2016). For product A produced in Ontario, 48% has been, while for product B the order accounted to 6% . 4% and 7% of the total demand comprised of the product C and D respectively. The product E had been ordered twice, which accounted to 11% and 10%. Lastly, product F recorded 14% of the total demand. This has been clearly illustrated below in the form of table: Table 1: Companys Production Profile Without Any Uncertainties The table provided below depicts the total order made by Western pharmaceuticals. Table 2: Case Fill Rates for Different Products The initial amount being 100% and using the formula as stated above, it can said that the case fill rate for product A, is 0.48, whereas for products B, it is 0.6. Similarly, the product C and D records case fill rates of 0.4 and 0.7 respectively. The two different versions of product E shows values of 0.11 and 0.10, with Product F recording the case fill rate of 0.14. Hence, it can be inferred that the historical case fill rate of the company was observed as 95% and current fill rate as 100% showing a complete difference of 5%. 2. Safety Stock and Average Inventory Safety stock is referred to as inventory level, which will be carried out in order to prevent the company from stock-outs. The key reasons for stock-outs are constant changes in the demand of the customers, inaccurate forecasting and deviation between lead times while manufacturing (King, 2011). Safety stock can be calculated using the formulas stated below: Safety Stock = ZStandard deviation of lead time (Source: John Wiley Sons, Inc, 2003). The value of Z can be taken as 1.65 for 95% of service level. The company placing reorder for the products, the stocks at present will be used up before the arrival of the new stocks (Bozarth, 2011). Table 3: Calculation of Safety Stock The above table shows the calculation of safety stock by taking Z value and Standard deviation of lead time. Inventory is often referred as the products associated with the business. The most important function of the stock is that it acts a buffer to the company can be used when needed. The theoretical inventory is referred to as stocks written in the record books (Accounting Tools, 2016). 3. Inventory Carrying Cost and Fill Rate Inventory carrying cost refers to the expenses that a business incurs for holding inventory. It includes the sum of capital for purchasing of stocks and capital that will be needed for maintaining them. Carrying cost is calculated on a percentage basis (Harding, 2004). The improvement in the fill rate can lead to decrease in carrying cost of the inventory, the requirement of which will be less in order to ensure the safety stock. This will hence help in the attainment of lower inventory levels (Wu Blackhurst, 2009). Service level is referred as the probability of not being stock-out with regards to the next replenishment cycle. It also includes avoidance of losing sales and therefore is found that the rise in historical fill rate is associated with rise in current order from the retailers (Craig, DeHoratius Rahman, 2016). 4. Impact on inventory and Service Centralizing stocks of the company may lead to increase in the cost of transportation (Fleischmann, 2012).The company on consolidating all medical stocks in single facility would increase the cost of the company as storing of the inventory would need more floor space. The company will also incur more cost for transporting current stock from different centers to one single facility that would cost Western Pharmaceuticals $500,000. This is because the expenses would be incurred for preparing a new site, tearing down, along with the transferring and setting up of new equipments. The problems related to fixed charge location does not consider the impacts of located facilities (N). It only considers tradeoff of the facility costs in relation to the number of facilities. It also includes average travel cost, which is reduced on the basis of square root of N, which is similar to that of the increase in the cost of inventory. When the warehousing cost is multiplied by N, variation in total d istribution cost is also found to be the same as the square root of N (Langevin Riopel, 2005). Item level is a concept that can be expanded to the company level and includes management of inventories in terms of unstructured volume. This approach also entails opportunity cost of the stocks (Jaber, 2009 It involves two steps of calculation namely the estimation of item level statistics and the testing of reliability of the test (Salkind, 2010). Conclusion It can be stated that logistics is an essential part of the business, which involves activities within the company while scalar chain refers to the management of transferring goods to the market. Case fill rate of the company is important as it identifies the difference between the order produced and the order shipped. In case of Western Pharmaceutical, the difference is 5%. The safety stock refers to the amount of stock, which is kept in buffer for emergency use and the company also found to have a safety stock of 11.55%. The company in order to facilitate stock of three Atlantic medical, the company has to bear more expenses as compared to the products delivered from individual centers. References Accounting Tools. (2016). What is inventory. Retrieved September 30, 2016, from https://www.accountingtools.com/questions-and-answers/what-is-inventory.html Bozarth, C. (2011). Safety stock analysis: inventory management models: A tutorial. Retrieved September 30, 2016, from https://scm.ncsu.edu/scm-articles/article/safety-stock-analysis-inventory-management-models-a-tutorial Craig, N., DeHoratius, N., Rahman, A. (2016). The impact of supplier inventory service level on retailer demand. Working Paper, 1-34. Fleischmann, B. (2012). The impact of the number of warehouses on inventories in a distribution system. University of Augsburg, 1-8. Grocery Manufacturers Association. (2016). CPG companies report record supply chain performance despite global economic downturn. Retrieved September 29, 2016, from https://www.gmaonline.org/news-events/newsroom/cpg-companies-report-record-supply-chain-performance-despite-global-economi/ Harding, M. L. (2004). Calculating the carrying cost of inventory. 89th Annual International Supply Management Conference, April 2004, 1-2. Jaber, M. Y. (2009). Inventory management: non-classical views. USA: CRC Press. John Wiley Sons, Inc (2003). Equations for inventory management. 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