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Le Hoa Binh - Homework 2

This document discusses inventory management and supply chain strategies for multiple regions in Europe. It analyzes the costs and benefits of using periodic review policies versus continuous review policies for inventory management. Tables of data on demand, inventory levels, transportation costs, and total costs are presented for decentralized vs centralized warehouse options across several European countries. The conclusion is that a decentralized network with warehouses in each country would have lower total costs than a single centralized warehouse, with Denmark having the lowest individual country costs. Centralization is not recommended based on the higher total costs calculated.

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Quynh Chau Tran
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26 views

Le Hoa Binh - Homework 2

This document discusses inventory management and supply chain strategies for multiple regions in Europe. It analyzes the costs and benefits of using periodic review policies versus continuous review policies for inventory management. Tables of data on demand, inventory levels, transportation costs, and total costs are presented for decentralized vs centralized warehouse options across several European countries. The conclusion is that a decentralized network with warehouses in each country would have lower total costs than a single centralized warehouse, with Denmark having the lowest individual country costs. Centralization is not recommended based on the higher total costs calculated.

Uploaded by

Quynh Chau Tran
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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FULL NAME: LE HOA BINH Logistics & Supply Chain Design

STUDENT ID: IEIEIU18007 HOMEWORK 2

1. (20 pt) Which is more practical in industries, continuous or periodic review policy? Why?
In industries, they are more using periodic review policy review. Firstly, periodic review policy
can reduce time for business to analyze inventory counts and save labor cost for counting all items in
warehouse. Secondly, It easy to determine which items sell fast or slow. When the business owners
can know the customer’s need, they can plan exactly time to pre-oders new items. So, its allow
management to reduce the inventory levels and inventory cost.
2. (80 pt)
b) We have table:

Average Coefficient Safet Order Total


Deman Average
Regions Deman of y quantit inventory
d Std inventory
d variation stock y cost
France 39.67 12.76 0.32 23.1 593.5 319.85 770.74
Italy 40.83 12.24 0.30 22.15 602.16 323.24 780.4
Poland 47.25 21.17 0.45 38.32 647.75 362.2 857.6
UK 48.08 13.22 0.27 23.93 653.44 350.65 846.7
Denmark 45.92 11.34 0.25 20.53 638.55 339.8 823.84
Centralized
221.75 37.52 0.17 67.9 1403.26 769.55 1838.97
warehouse

Inbound Outbound Total transportation


Warehouse Inbound Outbound
cost cost cost
France 12 13 476 515.7 991.67
Italy 11.5 13 469.6 530.8 1000.42
Poland 11 13 519.75 614.3 1134
UK 9 13 432.75 625.1 1057.83
Denmark 7 13 321.4167 596.9 918.33
We can aggregate the total cost and inventory level off all regions:

Transportation
Inventory cost Total cost Inventory level
cost
Decentralized 4079.29 5102.25 9181.54 1695.73
France 1838.97 5911.67 7750.64 735.59
Italy 1838.97 5516.13 7355.10 735.59
Poland 1838.97 5391.42 7230.39 735.59
UK 1838.97 4904.42 6743.39 735.59
Denmark 1838.97 4658.33 6497.30 735.59

Cost
Service level Inventory cost Transportation cost Total cost Inventory level
comparison
Decentralized 0.9 4155.56 5102.25 9257.81 1756.75
France 9.97 1879.43 5911.67 7791.10 801.91
Italy 9.97 1879.43 5516.13 7395.55 801.91
Poland 9.97 1879.43 5391.42 7270.85 801.91
UK 9.97 1879.43 4904.42 6783.85 801.91
Denmark 9.97 1879.43 4658.33 6537.76 801.91

In conclusion, Denmark will cost ABC company the least amount of money. Hence, Demark
should be considered.
c) We calculate the total cost:
Centralize Inboun Inbound Outbound Transportation Inventory cost
Outbound Total cost
d options d cost cost cost (0.9)
France 12 13 3991.5 3250.667 7242.17 1796.52 9038.69
3825.18
Italy 11.5 13 2966 6791.19 1796.52 8587.71
8
3658.87
Poland 11 13 2952.167 6611.04 1796.52 8407.56
5
2993.62
UK 9 13 2908.667 5902.29 1796.52 7698.81
5
2328.37
Denmark 7 13 3106.083 5434.46 1796.52 7230.98
5
Denmark is the best location to located the centralized warehouse. Wherase, the total cost in c)
question is higher then the total cost in b) question. Hence, this strategy should not be applied to this case.

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