Operations Management: Processes and Supply Chains, 12th Edition

Solved Problem 1

1. A distribution center experiences an average weekly demand of 50 units for one of its items. The product is valued at $650 per unit. Inbound shipments from the factory warehouse average 350 units. Average lead time (including ordering delays and transit time) is 2 weeks. The distribution center operates 52 weeks per year; it carries a 1-week supply of inventory as safety stock and no anticipation inventory. What is the value of the average aggregate inventory being held by the distribution center?

Solution

Type of Inventory	Calculation of Aggregate Average Inventory
Cycle	$\frac{Q}{2}=\frac{350}{2}$	$=175units$
Safety stock	1-week supply	$=50units$
Anticipation	None
Pipeline	$\overline{d}L=\left(50units/week\right)$ (2 weeks) ...