Inventory Targets Assignment | Homework For You
You recently recommended new inventory targets for your chilled beverages and dry snacks company, based on some super fancy MEIO techniques that you heard about in the class of a brilliant, inspiring, and entertaining lecturer who you later found out was Jack Ryan’s smarter, better looking and dramatically more humble CIA counterpart.
The VP of Supply Chain was thrilled with your thought leadership; but, now she needs to translate those targets into operational and financial impacts. Your analysis resulted in inventory targets expressed as days of forward demand coverage.
The average COGS per case is $40. 50 cases fit per full pallet. Your recommended target average days of inventory, by product type, is:
- Snacks: 30 days
- Beverages: 7 days for Q1; 14 days for Q2 and Q3; 3 days for Q4
2019 forecasted sales, in COGS ($MM USD);
| JAN | FEB | MAR | APR | MAY | JUN | JUL | AUG | SEP | OCT | NOV | DEC | |
| Snacks | 9.1 | 9.3 | 9.3 | 9.2 | 9.2 | 9.1 | 12.5 | 8.5 | 8.8 | 9.7 | 10.4 | 11.6 |
| Beverages | 2.5 | 2.5 | 2.9 | 5.7 | 5.7 | 15.2 | 21.1 | 17.3 | 16.1 | 7.4 | 3.1 | 2.2 |
Using the business scenario above, answer the following question:
The warehouses have high enough ceilings to support three levels of racking, such that one standard GMA pallet footprint on the floor can have three actual pallets stored above that footprint (one on the floor, two more above).
How big should the warehouse should be, in order to ensure that the warehouse is large enough to handle peak storage needs and still be at no more than 85% full in order to provide some buffer for daily and weekly volatility in demand and replenishment?
Assume total warehouse footprint must be three times the storage footprint to account for aisles, docks, offices, etc.
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