STARTECH.

COM
Presented by: Group 6

Harsh Vardhan M026-20

Akshunn Kaushik M140-20
Cyril Prince M151-20
Himanshi Bairagi M157-20
Sneha Yadav M187-20
Yogita Sharma M201-20
Anubhav Jain M208-20
Saurabh Jain M248-20
Sumit Kumar M257-20
Sweta M260-20
 ROADMAP

Q1. The optimal Q3. Recommendations

inventory levels would you make to Paul
for the 5 seed
warehouses

01 02 03 04
Case Facts Q2. Alternatives and
probable advantages
and disadvantages of
the option
 Case Facts

01 02 03
Startech was a Paul Seed wanted to improve Sales revenue grew by 70
manufacturer and supply chain to accommodate Mn USD in previous 4 Years
distributor of technology the increasing complexities.
products

04 05 06
Ensuring that key Startech focused on products in Inventory as percentage of
connectivity products were growth stage and discontinued sales were 35%, Paul had to
available was key element of products. strategise the working capital
Startech’s strategy utilization to achieve this.
Assumptions Made
● Selling Price of the product is 25% higher than the Cost Price.
● We have assumed the correlation between the demand at individual warehouses to
be 0.6
● It is assumed that in centralized system the overall transportation costs will
increase by 10%, so it will become 25% (earlier 15%)
● Holding cost per SKU = 20% of product price
● CSL of Y ranked product is assumed to be 0.9 (90%)
● We have assumed that no extra costs will be incurred in building and maintaining
the single centralized system. (Cost incurred in building it will be equal to the
Income from selling the 5 SKU)
Q1. Safety Inventory for 5 warehouses

● Lead Time = 1 month ( given in case)

● Safety Inventory = NORMSINV(CSL) * SQRT(L) * Stdev(D)

Warehouse No. Total Safety

Inventory
● 10 2441
● 20 665
● 30 1806.123
● 40 2372.61
● 70 1852.34
 Q2: As Jeff Brodie, what
alternatives would you
consider? What are the
probable advantages and
disadvantages of this option?
Considered Alternative : Centralization of the safety inventory at one
location

Pros
● Reduced Operational Costs:Instead of paying more rent, warehouses will no
longer require the expenditure of additional funds to purchase new
equipment and technologies.
● Reduced Inbound Costs: Because of the capacity to store greater inventory,
centralized warehousing can also reduce the cost of shipping process

Cons
● There will be an increase in response time to customer: Because either the
customer has to come to the centralized location to acquire the product or
the product has to be shipped or transported to large distance thus
increasing the response time
● Rise in the transportation cost
Decentralization of safety inventory at respective warehouses

Pros
● Lower transportation , storage and facility costs
● Higher responsiveness

Cons
● Increase in maintenance and operational costs such as rents and utilities
due to increase in number of warehouses
● Establishment of highly advanced technology systems to connect all the
warehouses for proper coordination among them
Q3: Recommendations to Paul Seed
● We recommend that they should stick to the disaggregate model
because total cost of disaggregate model is less than aggregate model.
(based on the assumptions).

The total cost for the disaggregate model comes out to be $ 15,291.79 for
lead time of one month.

For the aggregate model, we’ve gotten total cost of $ 15,937 for lead time of
one month.

● For correlation = 0.417, we are indifferent between aggregate and

disaggregate provided all other assumptions hold.

If correlation coefficient is less than 0.417 then we will prefer aggregate

model and in case of coefficient is more than 0.417, preference will be
disaggregate model
Thank You!