Contemporary Logistics 11th Edition

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PART II
END-OF-CHAPTER QUESTIONS

CHAPTER 8: INVENTORY MANAGEMENT

8-1. How might different organizational functions have different inventory management
objectives?

Marketing, for example, tends to want to ensure that sufficient inventory is available for
customer demand to avoid potential stockout situations—which translate into higher
inventory levels. Alternatively, the finance group generally seeks to minimize the cost
associated with holding inventory, which translates into lower inventory levels.

8-2. What makes is difficult for managers to achieve the proper balance of inventory?

Achieving the proper balance of inventory can be quite difficult because of the trade-offs
between inventory carrying cost and stockout cost. More specifically, holding high levels
of inventory (overstock) result in higher inventory carrying costs and low (or no)
stockout costs. Alternatively, holding low levels of inventory result in low inventory
carrying costs and some (high) stockout costs.

8-3. Distinguish among cycle, safety, pipeline, and speculative stock.

Cycle (base) stock refers to inventory that is needed to satisfy normal demand during the
course of an order cycle. Safety (buffer) stock refers to inventory that is held in addition
to cycle stock to guard against uncertainty in demand and/or lead time. Pipeline (in-
transit) stock is inventory that is en route between various nodes in a logistics system,
while speculative stock is inventory that is held for several reasons to include seasonal
demand, projected price increases, and potential product shortages.

8-4. Define what is meant by inventory carrying costs, and list its primary components.

Inventory carrying costs refer to the costs associated with holding inventory. Inventory
carrying costs consist of a number of different components, and their importance can vary
from product to product. These components include obsolescence costs, shrinkage costs,
storage costs, taxes, and interest costs.

8-5. What are ordering costs, and what is the trade-off between inventory carrying costs
and ordering costs?

Ordering costs refer to those costs associated with ordering inventory, such as order costs
and set up costs. Order costs include, but are not limited to, the costs of receiving an
order (e.g., the wages of the person who takes orders by telephone), conducting a credit
check, verifying inventory availability, entering orders into the system, preparing
invoices, and receiving payment. The trade-off that exists between carrying and ordering
costs is that they respond in opposite ways to the number of orders or size of orders. That

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is, an increase in the number of orders leads to higher order costs and lower carrying
costs.

8-6. Discuss the concept of stockout costs. How can a stockout cost be calculated?

Stockouts refer to situations where customers demand items that are not immediately
available and stockout costs refer to the costs associated with not having items available.
Calculation of a stockout cost first requires a company to classify potential customer
responses to a stockout (e.g., delays the purchase, lost sale, lost customer). Next, the
company needs to assign probabilities to the various responses as well as to assign
monetary losses to the various responses. The respective probabilities and losses are
multiplied together and then all costs are summed to yield an average cost of stockout.

8-7. Distinguish between a fixed order quantity and fixed order interval system. Which
one generally requires more safety stock? Why?

In a fixed order quantity system, the order size stays constant (although the time interval
between orders may vary); in a fixed order interval system, the time interval is constant
(although the order size may vary). The infrequency of inventory monitoring makes a
fixed order interval system more susceptible to stockouts and thus there is likely to be
higher levels of safety stock in a fixed order interval system.

8-8. Explain the logic of the EOQ model.

The logic of the EOQ model is as follows: determining an order quantity requires a
company to balance two costs: the costs of carrying the inventory and the costs of
ordering it. Inventory carrying costs are in direct proportion to order size; that is, the
larger the order, the greater the inventory carrying costs. Ordering costs, by contrast, tend
to decline with order size but not in a linear fashion. The EOQ attempts to find the point
(quantity) at which ordering costs equals carrying costs.

8-9. What assumptions are associated with the EOQ model?

The basic EOQ model is grounded in the following eight assumptions:

• A continuous, constant, and known rate of demand

• A constant and known replenishment or lead time
• A constant purchase price that is independent of the order quantity
• All demand is satisfied (no stockouts are allowed)
• No inventory in transit
• Only one item in inventory or no interaction between inventory items
• An infinite planning horizon
• Unlimited capital availability.

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8-10. How can inventory flow diagrams be useful to a logistics manager?

They present a visual depiction of additions to, and subtractions from, inventory. This
could be helpful in identifying any patterns that might be occurring. In addition,
inventory flow examples illustrate how safety stock can offset an increased rate of
demand as well as longer than normal replenishment cycles.

8-11. Discuss what is meant by ABC analysis of inventory. What are several measures
that can be used to determine ABC status?

ABC analysis is an approach that recognizes all inventories are not of equal value to a
firm and, as a result, all inventory should not be managed in the same way. Measures that
can be used to determine ABC status include sales volume in dollars, sales volume in
units, the fastest selling items, item profitability, or item importance.

8-12. Define what is meant by dead inventory. What are several ways to manage it?

Dead inventory refers to product for which there is no sales during a 12-month period.
Because dead inventory has often been associated with overproduction of items that
customers do not want (or need), one suggestion would be make to order as opposed to
make to stock. Having said this, an increasing source of dead stock in recent years
involves special, highly customized orders that never end up with the customer.
Suggestions for dealing with this situation include partial (or full) prepayment as well as
a no-return policy. Another suggestion is for companies to more aggressively market
their dead stock, and companies might also sell dead inventory via auctions. Another
possibility is to donate the dead inventory to charitable causes. A last resort is to simply
throw away the dead inventory in order to free up storage space.

8-13. In what ways can inventory turnover provide important insights about an
organization’s competitiveness and efficiency?

A particular organization can compare its turnover figures to those of direct competitors
or other organizations with “desirable” turnover ratios. With respect to efficiency, low
turnover indicates that a company is taking longer to sell its inventory, perhaps because
of product obsolescence or pricing problems. By contrast, high turnover may signal a
low level of inventories, which can increase the chance of product stockouts.

8-14. Discuss some of the managerial challenges that complementary products present.

One managerial issue with complementary products is that so many complementary items
might exist for a particular product that it is impossible to display or carry them in the
same section of a store. Another issue involves the amount of inventory to be carried.
For example, razor blades tend to sell faster than razors and it might be argued that razors
should be dropped in favor of faster-moving products. However, the sale and display of
the razors might be necessary to support the sale of the razor blades.

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8-15. What are substitute items, and how might they affect safety stock policies?

Substitute items refer to products that customers view as being able to fill the same need
or want. With respect to safety stock policies, if a consumer has little hesitation in
substituting another item for one that is out of stock, there would appear to be minimal
penalties for a stockout. It is also important that companies understand substitution
patterns in the sense that Product A may be a substitute for Product B, but the reverse
may not be true. In such a situation, safety stock policies would need to reflect the
appropriate relationships.

8-16. How might a hospital’s decisions with respect to substitute products differ from a
supermarket’s decisions with substitute products?

Because of the many possibilities for substitutability, many grocery chains target in-stock
rates of 95 percent for individual stores so that sufficient substitutes exist for a customer
to purchase a substitute item rather than go to a competing store. Some of the issues that
hospitals confront with respect to substitute products include:

• What safety risks does a substitute product pose for patients and hospital staff?
• Is the substitute product compatible with current equipment?
• How will information about the substitute product be communicated to hospital
staff?
• How do a patient’s insurance requirements impact the ability to use a substitute
product?

8-17. How do the consequences of JIT go far beyond inventory management?

One consequence is that suppliers must deliver high-quality materials to the production
line; because of JIT’s emphasis on low or no safety stock, defective materials result in a
product line shutdown. In addition, JIT emphasizes minimal inventory levels, and as a
result customers tend to place smaller, more frequent orders. As such, it is imperative
that suppliers’ order systems be capable of handling an increased number of orders in an
error-free fashion. In addition, because the transit-time reliability tends to decrease with
distance, suppliers need to be located relatively close to their customers.

8-18. Why should organizations carefully consider potential trade-offs before adopting a
lean philosophy?

The lean philosophy was conceived and nurtured in an environment—low fuel prices,
local or regional sourcing, and limited terrorism—far different than today’s environment.
Today’s emphasis on global sourcing translates into longer and more erratic transit
times—and longer and more erratic transit times don’t align very well with lean’s
emphasis on shipments that arrive exactly when needed. In a similar fashion, today’s
high fuel prices cause transportation companies to focus on lower costs through moving
larger freight volumes—a practice that doesn’t align very well with lean’s emphasis on
smaller shipments.

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8-19. Discuss some of the challenges that service parts logistics creates for logistics
managers.

One challenge is that it can be extremely difficult to forecast the demand for the
necessary parts. The difficulties in forecasting demand lead to challenges with respect to
which parts to carry, the appropriate stocking levels for the parts that are carried, and
higher inventory levels. Another challenge involves the number of warehousing facilities
that should be used. One possibility is to locate the parts at numerous warehousing
facilities in that this allows the parts to be fairly close to potential customers.
Alternatively, the parts could be located at one centralized facility; although this would
require the use of premium transportation for some shipments, this cost can be offset by
the inventory cost savings that result from inventory being held in only one facility.

8-20. How does vendor-managed inventory differ from traditional inventory

management?

In traditional inventory management, the size and timing of replenishment orders are the
responsibility of the party using the inventory, such as a distributor or retailer. Under
vendor-managed inventory (VMI), the size and timing of replenishment orders are the
responsibility of the manufacturer. VMI represents a huge philosophical shift for some
organizations in the sense that they are allowing another party to have control over their
inventories.

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PART III
EXAMINATION QUESTIONS

CHAPTER 8: INVENTORY MANAGEMENT

Multiple Choice Questions (correct answers are bolded)

1. ____ refers to stocks of goods and materials that are maintained for many purposes, the
most common being to satisfy normal demand patterns.

a. logistics
b. supply chain management
c. inventory
d. production

2. Holding high levels of inventory result in ____ inventory carrying costs and ____
stockout costs.

a. high; high
b. high; low
c. low; high
d. low; low

3. ____ stock refers to inventory that is needed to satisfy normal demand during the
course of an order cycle.

a. base
b. speculative
c. pipeline
d. safety

4. ____ stock refers to inventory that is held in addition to cycle stock to guard against
uncertainty in demand and/or lead time.

a. base
b. pipeline
c. speculative
d. buffer

5. ____ stock refers to inventory that is en route between various nodes in a logistics
system.

a. base
b. safety
c. speculative
d. cycle

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 e. none of the above

6. ____ stock refers to inventory that is held for several reasons, to include seasonal
demand, projected price increases, and potential shortages of product.

a. base
b. safety
c. pipeline
d. speculative

7. ____ stock is carried to stimulate demand.

a. base
b. psychic
c. speculative
d. attractive
e. none of the above

8. Inventory costs in the United States in the twenty-first century represent approximately
____ of total logistics costs.

a. one-fifth
b. one-fourth
c. one-third
d. one-half

9. All of the following statements are true, except:

a. the importance of individual carrying costs factors (categories) is generally

consistent from product to product
b. inventory carrying costs consist of a number of different components or factors
c. in general, companies prefer to carry less inventory as carrying costs increase
d. in general, inventory carrying costs are expressed in percentage terms
d. all of the above are true

10. Inventory carrying costs in the United States in the twenty-first century have ranged
between ____ and ____ percent.

a. 4; 9
b. 9; 14
c. 14; 19
d. 19; 24

11. Inventory shrinkage ____.

a. is another name for inventory turnover

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 b. refers to the fact that more items are recorded entering than leaving
warehousing facilities
c. refers to situations where the size and/or volume of inventory is decreased over
time
d. refers to a technique of stabilizing unit loads by using shrink wrap packaging

12. Each of the following is a component of inventory carrying cost except:

a. accounting cost
b. storage cost
c. shrinkage cost
d. interest cost
e. all of the above are components

13. In the United States, ____has traditionally provided a convenient starting point when
estimating the interest charges associated with maintaining inventory.

a. Gross Domestic Product growth

b. Consumer Price Index
c. the prime rate of interest
d. the yield on US Treasury bills

14. Which of the following is not a component of ordering (order) costs?

a. costs of preparing invoices

b. costs of receiving orders
c. costs of verifying inventory availability
d. costs of conducting a credit check
e. all are components of ordering (order) costs

15. Which of the following situations is likely the most damaging (costly) with respect to
a stockout?

a. the customer buys a substitute product that yields a higher profit for the seller
b. the customer buys a substitute product that yields a lower profit for the seller
c. the customer goes to a competitor for a purchase
d. the customer says, “Call me when it’s in”

16. Which of the following statements is false?

a. with respect to stockouts, a delayed sale is virtually costless to a company

because of the customer’s brand loyalty
b. the higher the average cost for a stockout, the more inventory (safety stock) that
should be held
c. tradeoffs exist between carrying costs and stockout costs
d. stockouts can be more costly than having too many items in stock

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 e. all of the above are true

17. Under conditions of certainty, a reorder point is equal to ____.

a. average daily demand times the length of the replenishment cycle

b. safety stock plus an EOQ
c. base stock plus safety stock
d. base stock minus safety stock

18. The economic order quantity (EOQ) deals with calculating the proper order size with
respect to ____ costs and ____ costs.

a. ordering; stockout
b. stockout; carrying
c. accounting; carrying
d. carrying; ordering

19. The economic order quantity (EOQ) determines ____.

a. the point at which a company should reorder

b. the point at which carrying costs equal ordering costs
c. the point at which the sum of carrying costs and ordering costs is maximized
d. the relevant inventory flow for a particular time period
e. none of the above

20. Which of the following is not an assumption associated with the basic economic order
quantity (EOQ) model?

a. no inventory in transit
b. an infinite planning horizon
c. stockouts are permitted
d. a constant and known replenishment or lead time
e. all are basic assumptions with the basic EOQ model

21. Concerning the EOQ model, if demand or annual usage increases by 10%, then the
EOQ will ____.

a. it depends on the particular product

b. increase
c. decrease
d. stay unchanged

22. Concerning the EOQ model, if the ordering costs increase by 10% and the product
value increases by 10%, then the EOQ will ____.

a. stay unchanged

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 b. increase
c. decrease
d. it depends on the particular product

23. Inventory flow diagrams illustrate that safety stock can prevent two problem areas,
____ and ____.

a. decreased rate of demand; longer-than-normal replenishment

b. increased rate of demand; shorter-than-normal replenishment
c. decreased rate of demand; shorter-than-normal replenishment
d. increased rate of demand; longer-than-normal replenishment

24. ____ recognizes that all inventories are not of equal value to a firm and thus all
inventories should not be managed in the same way.

a. vendor-managed inventory
b. suboptimization
c. marginal analysis
d. ABC analysis of inventory

25. ABC analysis of inventory ____.

a. applies activity-based costing to managing inventory

b. recognizes that inventories are not of equal value to a firm
c. is synonymous with vendor-managed inventory
d. is an alternative to the EOQ model

26. Dead inventory (dead stock) refers to a product for which there is no sales during a
____ month period.

a. three
b. six
c. twelve
d. twenty-four

27. All of the following are suggestions for dealing with dead stock (inventory), except
____.

a. aggressive marketing
b. donate to charities
c. make to order
d. throw it away
e. all of the above are suggestions

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28. Inventory turnover can be calculated by ____.

a. dividing the cost of goods sold by average inventory

b. dividing average inventory by the costs of goods sold
c. multiplying average inventory by 1.5
d. adding beginning and ending inventory and then dividing by two
e. none of the above

29. ____ items refer to those that are used or distributed together.

a. me-too
b. substitute
c. co-branded
d. complementary

30. ____ products refer to those that customers view as being able to fill the same need or
want as another product.

a. copycat
b. me-too
c. substitute
d. co-branded

31. Which of the following is not an example of a lean inventory approach?

a. just-in-time
b. collaborative planning, forecasting, and replenishment
c. efficient consumer response
d. quick response
e. all of the above are lean inventory approaches

32. Which of the following statements about the lean approach and JIT is false?

a. JIT tends to focus on product movement from manufacturer to retailer

b. organizations should give careful consideration before adopting a lean
philosophy
c. the lean approach views inventory as waste
d. trucking is an important mode of transportation in JIT systems
e. all of the above are true

33. Which of the following statements about service parts logistics is false?

a. customer expectations for service parts logistics continues to increase

b. some organizations outsource their service parts logistics to companies that
specialize in this area
c. service parts logistics creates a variety of potential challenges for logisticians

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 d. the worldwide economic slowdown of 2008 and 2009 caused a decreased
emphasis on service parts logistics
e. all of the above are true

34. Under ____, the size and timing of replenishment orders are the responsibility of the
manufacturer.

a. quick response
b. supply chain management
c. vendor-managed inventory
d. efficient consumer response

35. Which of the following is not a potential benefit to vendor-managed inventory?

a. reduced order errors

b. improved demand forecasts
c. reduced inventories
d. fewer stockouts
e. all are VMI benefits

True-False Questions

1. Inventories are stocks of goods and materials that are maintained for many purposes.
(True)

2. Different organizational functions, such as marketing and production, tend to have

similar inventory management objectives. (False)

3. Inventory carries its greatest costs after value has been added through manufacturing
and processing. (True)

4. Buffer stock is also referred to as cycle stock. (False)

5. Safety stock refers to inventory that is held in addition to cycle stock to guard against
uncertainty in demand and/or lead time. (True)

6. Pipeline stock is inventory that is en route between various fixed facilities in a logistics
system. (True)

7. Psychic stock is associated with retail stores. (True)

8. Inventory tends to be one of the largest assets (in terms of dollar value) on a
company’s balance sheet. (True)

9. As a general rule, companies prefer to carry less inventory as the carrying cost
percentage decreases. (False)

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10. The range of inventory carrying costs in the United States in the twenty-first century
has been between 22 and 27 percent. (False)

11. Inventory shrinkage refers to the fact that products lose value through time. (False)

12. Obsolescence costs are one component of inventory carrying costs. (True)

13. The trade-off that exists between carrying costs and ordering costs is that they
respond in opposite ways to the number of orders or size of orders. (True)

14. Not having enough items can be as bad as, and sometimes worse than, having too
many items. (True)

15. The higher the average cost of a stockout, the more likely a company is going to want
to hold some amount of inventory (safety stock) to protect against stockouts. (True)

16. A reorder point is equal to average daily demand divided by the length of the
replenishment cycle. (False)

17. One requirement of a fixed order quantity system is that the inventory must be
constantly monitored. (True)

18. A fixed order quantity system is more susceptible to stockouts than is a fixed order
interval system. (False)

19. The EOQ is the point at which carrying costs equal ordering costs. (True)

20. One assumption of the basic EOQ model is a continuous, constant, and known rate of
demand. (True)

21. The EOQ can only be calculated with respect to the number of units to be ordered.
(False)

22. Inventory flow diagrams graphically depict the demand for, and replenishment of,
inventory. (True)

23. Safety stock can prevent against two problem areas: An increased rate of demand and
longer-than-normal replenishment. (True)

24. Marginal analysis recognizes that all inventories should not be managed in the same
way. (False)

25. In terms of ABC analysis of inventory, no more than 25% of items should be
classified as “A’s.” (False)

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26. Dead stock (inventory) refers to product for which there is no sales during a 12-month
period. (True)

27. One way of dealing with dead stock (inventory) is for companies to simply throw it
away. (True)

28. The number of times that inventory is sold in one year is referred to as average
inventory. (False)

29. Inventory turnover can be calculated by dividing costs of goods sold by average
inventory. (True)

30. High inventory turnover indicates that a company is taking longer to sell its
inventory. (False)

31. Complementary products can be defined as inventories that can be used or distributed
together, such as razor blades and razors. (True)

32. Many grocery chains target in-stock rates of 90 percent for individual stores so that
sufficient substitutes exist for a customer to purchase a substitute item rather than go to a
competing store. (False)

33. Lean manufacturing focuses on the elimination of waste. (True)

34. Because of smaller, more frequent orders and closer supplier location, trucking tends
to be an important mode of transportation in the just-in-time approach. (True)

35. Efficient consumer response (ECR) and collaborative planning, forecasting, and
replenishment (CPFR) are examples of lean inventory approaches. (False)

36. A confluence of events, such as increasing global sourcing, suggests that

organizations should carefully consider the potential trade-offs before adopting a lean
inventory philosophy. (True)

37. Service parts logistics has decreased in importance in recent years. (False)

38. One logistical challenge with service parts logistics is that it can be extremely
difficult to forecast the demand for the necessary parts. (True)

39. In vendor-managed inventory, the size and timing of replenishment orders are the
responsibility of the manufacturer. (True)

40. Vendor-managed inventory can only be applied to consumer, and not industrial,
products. (False)

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PART IV
CASE SOLUTIONS

CASE 8-1: LOW NAIL COMPANY

Question 1: Using the EOQ methods outlined in the chapter, how many kegs of nails
should Low order at one time?

The EOQ formula is:

EOQ = √ 2 (annual use in units) (cost of placing an order) /

annual carrying cost per item per year

= √ 2 (2000) (60) / 2

= √ 120,000

= 345 kegs per order

Note the 2 in the denominator. That is because, on average, the rented warehouse space is
only half full, which, makes the average warehousing cost per keg be $2.

Question 2: Assume all conditions in Question 1 hold, except that Low’s supplier now
offers a quantity discount in the form of absorbing all or part of Low’s order processing
costs. For orders of 750 or more kegs of nails, the supplier will absorb all the order
processing costs; for orders between 249 and 749 kegs, the supplier will absorb half.
What is Low’s new EOQ? (It might be useful to lay out all costs in tabular form for this
and later questions.)

Sum of processing
Orders/year Order size Processing costs Warehousing costs and warehousing
($) ($) costs ($)
1 2,000 Free 2,000 2,000
2 1,000 Free 1,000 1,000
3 667 90 667 757
4 500 120 500 620
5 400 150 400 550
6 334 180 334 514
7 286 210 286 496
8 250 240 250 490
9 223 540 223 743

The new EOQ, based on the above information, is 250 kegs.

Question 3: Temporarily, ignore your work on Question 2. Assume that Low’s

warehouse offers to rent Low space on the basis of the average number of kegs Low will
have in stock, rather than on the maximum number of kegs Low would need room for

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whenever a new shipment arrived. The storage cost per keg remains the same. Does this
change the answer to Question 1? If so, what is the new answer?

The relevant table is as follows:

Sum of processing
Orders/year Order size Processing costs Warehousing costs and warehousing
($) ($) costs ($)
1 2,000 60 1,000 1,060
2 1,000 120 500 620
3 667 180 334 524
4 500 240 250 490
5 400 300 200 500

The new EOQ, based on the above information, is 500.

Question 4: Take into account the answer to Question 1 and the supplier’s new policy
outlined in Question 2 and the warehouse’s new policy in Question 3. Then determine
Low’s new EOQ.

The relevant table is as follows:

Sum of processing
Orders/year Order size Processing costs Warehousing costs and warehousing
($) ($) costs ($)
1 2,000 Free 1,000 1,000
2 1,000 Free 500 500
3 667 90 334 424
4 500 120 250 370
5 400 150 200 350
6 334 180 167 347
7 286 210 143 353

The new EOQ, based on the above information, is 334.

Question 5: Temporarily, ignore your work on Questions 2, 3, and 4. Low’s luck at the
race track is over; he now must borrow money to finance his inventory of nails. Looking
at the situation outlined in Question 1, assume that the wholesale cost of nails is $40 per
keg and that Low must pay interest at the rate of 1.5% per month on the unsold inventory.
What is his new EOQ?

This answer can be done in tabular form as well, with the interest on inventory
appearing as a new column. If one order is placed a year, the average inventory is
1,000 kegs, worth $40,000, with annual interest charges (1.5 x 12 = 18%) of
$7,200. Other interest costs are calculated in a similar fashion, adjusted for
average inventory.

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The relevant table is as follows:

Sum of
processing,
Orders/year Order size Processing costs Warehousing Interest costs ($) warehousing,
($) costs ($) and interest costs
($)
1 2,000 60 2,000 7,200 9,260
2 1,000 120 1,000 3,600 4,720
3 667 180 667 2,405 3,252
4 500 240 500 1,800 2,540
5 400 300 400 1,440 2,140
6 334 360 334 1,203 1,897
7 286 420 286 1,030 1,736
8 250 480 250 900 1,630
9 223 540 223 807 1,570
10 200 600 200 720 1,520
11 182 660 182 656 1,498
12 167 720 167 605 1,492
13 154 780 154 555 1,489
14 143 840 143 519 1,502

The new EOQ, based on the above information, is 154 kegs.

Question 6: Taking into account all the factors listed in Questions 1, 2, 3, and 5,
calculate Low’s EOQ for kegs of nails.

The relevant table is as follows:

Sum of
processing,
Orders/year Order size Processing costs Warehousing Interest costs ($) warehousing,
($) costs ($) and interest costs
($)
1 2,000 Free 1,000 7,200 8,200
2 1,000 Free 500 3,600 4,100
3 667 90 334 2,405 2,829
4 500 120 250 1,800 2,170
5 400 150 200 1,440 1,790
6 334 180 167 1,203 1,550
7 286 210 143 1,030 1,383
8 250 240 125 900 1,265
9 223 540 112 807 1,459

The new answer, based on the above information, is 250 kegs.

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