OM-2 Individual Assignment

The other two excel sheets

have the assignment
details.

Kindly note that most of

the cells have formulas,
which have been stated
initially in the working, and
then calculated using the
data given in the case.
 Annual inventory item cost + annual
Total annual inventory ordering cost + annual
inventory cost inventory carrying cost
formula

Demand rate is stochastic, and lead time is constant, equal to the

mean (S1)

US imports from Direct

Oklahoma City DC from Asia
SKU (A1) Local Mexico product (A2) (A3)
2300105
1609313
2780211
1709786
6300612
THIS IS THE ST
1309034
6509036
6109015
4309113
2000234

SKU D C0 CH Q
2300105
S1A1 21600 243 0.1654 7966.678
S1A2 21600 14 0.21045 1695.241
S1A3 21600 630 0.1342 14240.85
S2A1 21600 243 0.1654 7966.678
S2A2 21600 14 0.21045 1695.241
S2A3 21600 630 0.1342 14240.85
S3A1 21600 243 0.1654 7966.678
S3A2 21600 14 0.21045 1695.241
S3A3 21600 630 0.1342 14240.85
1609313
S1A1 1380 48.6 39.16475 58.52279
S1A2 1380 2.8 33.55695 15.17548
S1A3 1380 126 38.71385 94.7778
S2A1 1380 48.6 39.16475 58.52279
S2A2 1380 2.8 33.55695 15.17548
S2A3 1380 126 38.71385 94.7778
S3A1 1380 48.6 39.16475 58.52279
S3A2 1380 2.8 33.55695 15.17548
S3A3 1380 126 38.71385 94.7778
2780211
S1A1 8100 257.58 0.1616625 5080.529
S1A2 8100 14.84 0.1872625 1133.05
S1A3 8100 667.8 0.1290875 9154.584
S2A1 8100 257.58 0.1616625 5080.529
S2A2 8100 14.84 0.1872625 1133.05
S2A3 8100 667.8 0.1290875 9154.584
S3A1 8100 257.58 0.1616625 5080.529
S3A2 8100 14.84 0.1872625 1133.05
S3A3 8100 667.8 0.1290875 9154.584
1709786
S1A1 1824 97.2 36.5895 98.44243
S1A2 1824 5.6 32.080125 25.23501
S1A3 1824 252 36.09075 159.5988
S2A1 1824 97.2 36.5895 98.44243
S2A2 1824 5.6 32.080125 25.23501
S2A3 1824 252 36.09075 159.5988
S3A1 1824 97.2 36.5895 98.44243
S3A2 1824 5.6 32.080125 25.23501
S3A3 1824 252 36.09075 159.5988
6300612
S1A1 1500 72.9 27.665375 88.91113
S1A2 1500 4.2 30.0463 20.47811
S1A3 1500 189 27.299525 144.1166
S2A1 1500 72.9 27.665375 88.91113
S2A2 1500 4.2 30.0463 20.47811
S2A3 1500 189 27.299525 144.1166
S3A1 1500 72.9 27.665375 88.91113
S3A2 1500 4.2 30.0463 20.47811
S3A3 1500 189 27.299525 144.1166
1309034
S1A1 360 72.9 30.16 41.71712
S1A2 360 4.2 29.2475 10.16826
S1A3 360 189 29.8975 67.46518
S2A1 360 72.9 30.16 41.71712
S2A2 360 4.2 29.2475 10.16826
S2A3 360 189 29.8975 67.46518
S3A1 360 72.9 30.16 41.71712
S3A2 360 4.2 29.2475 10.16826
S3A3 360 189 29.8975 67.46518
6509036
S1A1 1296 72.9 2.796625 259.9346
S1A2 1296 4.2 2.735175 63.08841
S1A3 1296 189 2.73815 422.98
S2A1 1296 72.9 2.796625 259.9346
S2A2 1296 4.2 2.735175 63.08841
S2A3 1296 189 2.73815 422.98
S3A1 1296 72.9 2.796625 259.9346
S3A2 1296 4.2 2.735175 63.08841
S3A3 1296 189 2.73815 422.98
6109015
S1A1 6480 486 2.463825 1598.879
S1A2 6480 28 3.3951 326.9303
S1A3 6480 1260 2.394125 2611.646
S2A1 6480 486 2.463825 1598.879
S2A2 6480 28 3.3951 326.9303
S2A3 6480 1260 2.394125 2611.646
S3A1 6480 486 2.463825 1598.879
S3A2 6480 28 3.3951 326.9303
S3A3 6480 1260 2.394125 2611.646
4309113
S1A1 10920 58.32 1.49695 922.4258
S1A2 10920 3.36 1.813 201.1857
S1A3 10920 151.2 1.465525 1501.086
S2A1 10920 58.32 1.49695 922.4258
S2A2 10920 3.36 1.813 201.1857
S2A3 10920 151.2 1.465525 1501.086
S3A1 10920 58.32 1.49695 922.4258
S3A2 10920 3.36 1.813 201.1857
S3A3 10920 151.2 1.465525 1501.086
2000234
S1A1 456 48.6 36.2535 34.96557
S1A2 456 2.8 37.207 8.284458
S1A3 456 126 35.751 56.6942
S2A1 456 48.6 36.2535 34.96557
S2A2 456 2.8 37.207 8.284458
S2A3 456 126 35.751 56.6942
S3A1 456 48.6 36.2535 34.96557
S3A2 456 2.8 37.207 8.284458
S3A3 456 126 35.751 56.6942
EOQ Formula (2DS/hC)^0.5

Lead time is stochastic, and demand rate is constant, equal to

the mean (S2) Both demand rate and lead times are random (S3)

US imports from
US imports from Local Mexico Direct from Asia Oklahoma City DC Local Mexico
Oklahoma City DC (A1) product (A2) (A3) (A1) product (A2)

THIS IS THE STRUCTURE

annual inventory
annual inventory annual inventory item cost (D*CI)
carrying cost ordering cost Total annual
CI ((Q*CH)/2) ((D*C0)/Q) inventory cost

0.6616 658.844260808273 658.8442608083 14290.56 15608.2485216165

0.8418 178.381725521422 178.3817255214 18182.88 18539.6434510428
0.5368 955.560987064667 955.5609870647 11594.88 13506.0019741293
0.6616 658.844260808273 658.8442608083 14290.56 15608.2485216165
0.8418 178.381725521422 178.3817255214 18182.88 18539.6434510428
0.5368 955.560987064667 955.5609870647 11594.88 13506.0019741293
0.6616 658.844260808273 658.8442608083 14290.56 15608.2485216165
0.8418 178.381725521422 178.3817255214 18182.88 18539.6434510428
0.5368 955.560987064667 955.5609870647 11594.88 13506.0019741293

156.659 1146.01515107786 1146.015151078 216189.42 218481.450302156

134.2278 254.621341210826 254.6213412108 185234.364 185743.606682422
154.8554 1834.60680228762 1834.606802288 213700.452 217369.665604575
 156.659 1146.01515107786 1146.015151078 216189.42 218481.450302156
134.2278 254.621341210826 254.6213412108 185234.364 185743.606682422
154.8554 1834.60680228762 1834.606802288 213700.452 217369.665604575
156.659 1146.01515107786 1146.015151078 216189.42 218481.450302156
134.2278 254.621341210826 254.6213412108 185234.364 185743.606682422
154.8554 1834.60680228762 1834.606802288 213700.452 217369.665604575

0.64665 410.665506632223 410.6655066322 5237.865 6059.19601326445

0.74905 106.088881486233 106.0888814862 6067.305 6279.48276297247
0.51635 590.871188690902 590.8711886909 4182.435 5364.1773773818
0.64665 410.665506632223 410.6655066322 5237.865 6059.19601326445
0.74905 106.088881486233 106.0888814862 6067.305 6279.48276297247
0.51635 590.871188690902 590.8711886909 4182.435 5364.1773773818
0.64665 410.665506632223 410.6655066322 5237.865 6059.19601326445
0.74905 106.088881486233 106.0888814862 6067.305 6279.48276297247
0.51635 590.871188690902 590.8711886909 4182.435 5364.1773773818

146.358 1800.97958145005 1800.97958145 266956.992 270558.9511629

128.3205 404.7710641832 404.7710641832 234056.592 234866.134128366
144.363 2880.02092492398 2880.020924924 263318.112 269078.153849848
146.358 1800.97958145005 1800.97958145 266956.992 270558.9511629
128.3205 404.7710641832 404.7710641832 234056.592 234866.134128366
144.363 2880.02092492398 2880.020924924 263318.112 269078.153849848
146.358 1800.97958145005 1800.97958145 266956.992 270558.9511629
128.3205 404.7710641832 404.7710641832 234056.592 234866.134128366
144.363 2880.02092492398 2880.020924924 263318.112 269078.153849848

110.6615 1229.87982263512 1229.879822635 165992.25 168452.00964527

120.1852 307.645648433388 307.6456484334 180277.8 180893.091296867
109.1981 1967.15725572462 1967.157255725 163797.15 167731.464511449
110.6615 1229.87982263512 1229.879822635 165992.25 168452.00964527
120.1852 307.645648433388 307.6456484334 180277.8 180893.091296867
109.1981 1967.15725572462 1967.157255725 163797.15 167731.464511449
110.6615 1229.87982263512 1229.879822635 165992.25 168452.00964527
120.1852 307.645648433388 307.6456484334 180277.8 180893.091296867
109.1981 1967.15725572462 1967.157255725 163797.15 167731.464511449

120.64 629.094205981902 629.0942059819 43430.4 44688.5884119638

116.99 148.698049751838 148.6980497518 42116.4 42413.7960995037
119.59 1008.52017828103 1008.520178281 43052.4 45069.4403565621
120.64 629.094205981902 629.0942059819 43430.4 44688.5884119638
116.99 148.698049751838 148.6980497518 42116.4 42413.7960995037
119.59 1008.52017828103 1008.520178281 43052.4 45069.4403565621
120.64 629.094205981902 629.0942059819 43430.4 44688.5884119638
116.99 148.698049751838 148.6980497518 42116.4 42413.7960995037
 119.59 1008.52017828103 1008.520178281 43052.4 45069.4403565621

11.1865 363.469844278724 363.4698442787 14497.704 15224.6436885575

10.9407 86.2789214118953 86.2789214119 14179.1472 14351.7050428238
10.9526 579.09127674314 579.0912767431 14194.5696 15352.7521534863
11.1865 363.469844278724 363.4698442787 14497.704 15224.6436885575
10.9407 86.2789214118953 86.2789214119 14179.1472 14351.7050428238
10.9526 579.09127674314 579.0912767431 14194.5696 15352.7521534863
11.1865 363.469844278724 363.4698442787 14497.704 15224.6436885575
10.9407 86.2789214118953 86.2789214119 14179.1472 14351.7050428238
10.9526 579.09127674314 579.0912767431 14194.5696 15352.7521534863

9.8553 1969.67951657116 1969.679516571 63862.344 67801.7030331423

13.5804 554.980605066519 554.9806050665 88000.992 89110.953210133
9.5765 3126.30387198685 3126.303871987 62055.72 68308.3277439737
9.8553 1969.67951657116 1969.679516571 63862.344 67801.7030331423
13.5804 554.980605066519 554.9806050665 88000.992 89110.953210133
9.5765 3126.30387198685 3126.303871987 62055.72 68308.3277439737
9.8553 1969.67951657116 1969.679516571 63862.344 67801.7030331423
13.5804 554.980605066519 554.9806050665 88000.992 89110.953210133
9.5765 3126.30387198685 3126.303871987 62055.72 68308.3277439737

5.9878 690.412628100037 690.4126281 65386.776 66767.6012562001

7.252 182.374814050625 182.3748140506 79191.84 79556.5896281012
5.8621 1099.93958688648 1099.939586886 64014.132 66214.011173773
5.9878 690.412628100037 690.4126281 65386.776 66767.6012562001
7.252 182.374814050625 182.3748140506 79191.84 79556.5896281012
5.8621 1099.93958688648 1099.939586886 64014.132 66214.011173773
5.9878 690.412628100037 690.4126281 65386.776 66767.6012562001
7.252 182.374814050625 182.3748140506 79191.84 79556.5896281012
5.8621 1099.93958688648 1099.939586886 64014.132 66214.011173773

145.014 633.812103702667 633.8121037027 66126.384 67394.0082074053

148.828 154.11991694781 154.1199169478 67865.568 68173.8078338956
143.004 1013.43708635514 1013.437086355 65209.824 67236.6981727103
145.014 633.812103702667 633.8121037027 66126.384 67394.0082074053
148.828 154.11991694781 154.1199169478 67865.568 68173.8078338956
143.004 1013.43708635514 1013.437086355 65209.824 67236.6981727103
145.014 633.812103702667 633.8121037027 66126.384 67394.0082074053
148.828 154.11991694781 154.1199169478 67865.568 68173.8078338956
143.004 1013.43708635514 1013.437086355 65209.824 67236.6981727103
ad times are random (S3)

Direct from Asia

(A3)

Minimum total
annual inventory
cost

Go with Direct
13506.00197413
from Asia

Go with Local
185743.6066824
Mexico Product
 Go with Local
185743.6066824
Mexico Product

Go with Direct
5364.177377382
from Asia

Go with Local
234866.1341284
Mexico Product

Go with Direct
167731.4645114
from Asia

Go with Local
42413.7960995
Mexico Product
42413.7960995
Mexico Product

Go with Local
14351.70504282
Mexico Product

Go with US
67801.70303314 Imports from
Oklahoma City DC

Go with Direct
66214.01117377
from Asia

Go with Direct
67236.69817271
from Asia
 At CSL=98%, Z=2.05 and L(Z)= 0.007 Z= 2.05 L(Z)

SKU D d C0 CH L(week) T(Weeks)

2300105 SP 1.33
USA 21600 420 4.86 0.15945 2 2
Local 21600 420 0.28 0.2 0.42857142857
Asia 21600 420 12.6 0.1342 9.28571428571 4
1609313 SP 176.94
USA 1380 28.75 4.86 38.2972 2 2
Local 1380 28.75 0.28 32.2925 0.42857142857
Asia 1380 28.75 12.6 38.71385 9.28571428571 4
2780211 SP 1.18
USA 8100 168.75 4.86 0.13985 2 2
Local 8100 168.75 0.28 0.165 0.42857142857
Asia 8100 168.75 12.6 0.1290875 9.28571428571 4
1709786 SP 142.22
USA 1824 38 4.86 36.536375 2 2
Local 1824 38 0.28 32 0.42857142857
Asia 1824 38 12.6 36.09075 9.28571428571 4
6300612 SP 166.67
USA 1500 31.25 4.86 27.150175 2 2
Local 1500 31.25 0.28 29.1675 0.42857142857
Asia 1500 31.25 12.6 27.299525 9.28571428571 4
1309034 SP 138.89
USA 360 7.5 4.86 28.7375 2 2
Local 360 7.5 0.28 27.0825 0.42857142857
Asia 360 7.5 12.6 29.8975 9.28571428571 4
6509036 SP 16.28
USA 1296 27 4.86 2.7218 2 2
Local 1296 27 0.28 2.605 0.42857142857
Asia 1296 27 12.6 2.73815 9.28571428571 4
6109015 SP 20.51
USA 6480 135 4.86 2.444425 2 2
Local 6480 135 0.28 3.3325 0.42857142857
Asia 6480 135 12.6 2.394125 9.28571428571 4
4309113 SP 9.49
USA 10920 227.5 4.86 1.45895 2 2
Local 10920 227.5 0.28 1.7075 0.42857142857
Asia 10920 227.5 12.6 1.465525 9.28571428571 4
2000234 SP 174.39
USA 456 9.5 4.86 36.239 2 2
Local 456 9.5 0.28 37.0575 0.42857142857
Asia 456 9.5 12.6 35.751 9.28571428571 4
 0.007

N sigma(d)(units/ sigma(L)(units/ sigma(DLT) SS E(n)

26 120.761472885 0.49135381491 317.6811819 651.246422895 57.8179751058

120.761472885 0 79.0569415042 162.066730084 48.6055552381
13 120.761472885 2.64575131106 1195.21964509 2450.20027243 108.764987703

26 45.8893596963 0.49135381491 92.8595129047 190.362001455 16.9004313487

45.8893596963 0 30.0416377716 61.5853574318 59.3223038657
13 45.8893596963 2.64575131106 183.748299312 376.684013589 16.7210952374

26 41.0589007809 0.49135381491 116.697854037 239.230600776 21.2390094348

41.0589007809 0 26.8793601114 55.1026882284 9.19194535313
13 41.0589007809 2.64575131106 470.885800911 965.315891868 42.8506078829

26 33.3301665162 0.49135381491 69.2258828556 141.913059854 12.5991106797

33.3301665162 0 21.8197158552 44.7304175031 49.3106268466
13 33.3301665162 2.64575131106 157.693056283 323.270765381 14.3500681218

26 21.7370651193 0.49135381491 46.1060743209 94.5174523579 8.39130552641

21.7370651193 0 14.2302494708 29.1720114151 27.8427272539
13 21.7370651193 2.64575131106 114.513918368 234.753532654 10.4207665715

26 7.72873426463 0.49135381491 15.8906793585 32.575892685 2.89210364326

7.72873426463 0 5.05964425627 10.3722707254 4.6732566803
13 7.72873426463 2.64575131106 34.4579453827 70.6387880346 3.13567302983

26 31.3979829501 0.49135381491 64.1820439212 131.573190038 11.6811319937

31.3979829501 0 20.5548047911 42.1373498217 11.171815318
13 31.3979829501 2.64575131106 134.909228743 276.563918923 12.2767398156

26 130.422390716 0.49135381491 269.14686644 551.751076201 48.984729692

130.422390716 0 85.3814968245 175.03206849 117.365478208
13 130.422390716 2.64575131106 594.61331973 1218.95730545 54.1098120954

26 161.337327774 0.49135381491 341.48846369 700.051350564 62.1509003916

161.337327774 0 105.62007385 216.521151392 134.909386918
13 161.337327774 2.64575131106 841.497088527 1725.06903148 76.576235056

26 8.21178015617 0.49135381491 17.0740230146 35.00174718 3.10747218867

8.21178015617 0 5.37587202229 11.0205376457 6.53692388092
13 8.21178015617 2.64575131106 39.0851634255 80.1245850223 3.55674987172
 annual inventory carrying annual inventory ordering
C(p) Q CI
cost ((Q*CH)/2) cost ((D*C0)/Q)

0.6922 2331.24642289 0.6378 170.07431905366 126.36

0.53 245.926818383 0.8 57.0060278550289 24.592681838303
0.7932 8030.20027243 0.5368 440.306107328897 163.8

23.7512 305.362001455 153.1888 8306.68041134201 126.36

47.77 4.89195803202 129.17 2067.73193224017 78.9867773744442
22.0846 758.648299304 154.8554 16637.700437956 163.8

0.6206 914.230600776 0.5594 55.2407264416579 126.36

0.52 165.80382713 0.66 22.7707592959052 13.6788157382136
0.66365 3207.28017758 0.51635 164.825936345413 163.8

-3.9255 293.913059854 146.1455 6466.5723876101 126.36

14.22 5.64977875673 128 1521.7698202063 90.3964601076834
-2.143 828.127908238 144.363 14198.9892987503 163.8

58.0693 219.517452358 108.6007 3349.34349707047 126.36

50 5.36648648245 116.67 929.138140187063 78.2634972384956
57.4719 649.932104083 109.1981 7983.63252969267 163.8

23.94 62.575892685 114.95 1135.1016391128 126.36

30.56 2.7283550633 108.33 317.852359920243 36.9453380008899
19.3 170.281645177 119.59 2525.88854988044 163.8

5.3928 239.573190038 10.8872 425.951539415995 126.36

5.86 16.6913956019 10.42 131.508339057156 21.7405427715133
5.3274 635.278204637 10.9526 893.759740752623 163.8

10.7323 1091.7510762 9.7777 1653.32708598181 126.36

7.18 32.9986700953 13.33 638.278402290248 54.9840340462575
10.9335 3012.52873402 9.5765 3515.02577428535 163.8

3.6542 1610.05135056 5.8358 1327.71941790598 126.36

2.66 59.8446011025 6.83 420.802194192604 51.0923281912265
3.6279 4747.56903148 5.8621 3143.65229236128 163.8

29.434 73.00174718 144.956 1586.21646990327 126.36

26.16 2.62505481289 148.23 457.032558169435 48.6389843643964
31.386 206.338870737 143.004 3491.55157759473 163.8
annual inventory item
Expected Shortage Cost Total annual inventory cost
cost (D*CI)

13776.48 40.0216023682253 14112.9359214219

17280 25.7609442761713 17387.3596539695
11594.88 86.2723882458966 12285.2584955748

211400.544 401.405525048338 220234.98993639

178254.6 2833.82645566572 183235.14516528
213700.452 369.278699879421 230871.231137835

4531.14 13.1809292552268 4725.92165569689

5346 4.77981158362963 5387.22938661775
4182.435 28.4378059215133 4539.49874226693

266569.392 -49.4578089732666 273112.866578637

233472 701.197113757985 235785.363394072
263318.112 -30.7521959849954 277650.149102765

162901.05 487.277238004556 166864.030735075

175005 1392.13636269719 177404.538000123
163797.15 598.901254320062 172543.483784013

41382 69.2369612195432 42712.6986003323

38998.8 142.814724150071 39496.4124220712
43052.4 60.518489475709 45802.6070393561

14109.8112 62.9940086154157 14725.1167480314

13504.32 65.4668377636113 13723.0357195923
14194.5696 65.4031036936408 15317.5324444463

63359.496 525.718814473637 65664.9019004554

86378.4 842.684133533669 87914.3465698702
62055.72 591.609630545107 66326.1554048305

63726.936 227.111820210889 65408.1272381169

74583.6 358.858969200987 75414.3534915848
64014.132 277.810923159621 67599.3952155209

66099.936 91.4653364011982 67903.9778063045

67592.88 171.005928724983 68269.5574712588
65209.824 111.632151473891 68976.8077290686
The data from Appendix D is used to calculate
the reorder point for each sourcing alternative,
utilizing the formulas on the right.

The reorder points for the 10 SKUs, for

Scenario 1, for the sourcing alternative "US
Imports from Oklahoma City DC" have been
calculated. Similarly, they can be calculated
for the other scenarios and sourcing
alternatives, using the formulas given in this
sheet and the case data.

SKU
2300105
1609313
2780211
1709786
6300612
1309034
6509036
6109015
4309113
2000234
 Scenario 1: Demand rate is stochastic, and lead time is constant, equal to the mean
Reorder point = expected demand during lead time + safety stock = [average
demand rate * constant lead time] + [standard normal deviate associated with the
cycle-service level * (constant lead time) * standard deviation of the demand rate]
0.5

Scenario 2: Lead time is stochastic, and demand rate is constant, equal to the
mean
Reorder point = expected demand during lead time + safety stock = [constant
demand rate * average lead time] + [standard normal deviate associated with the
cycle-service level * constant demand rate * standard deviation of the lead time]

Scenario 3: Both demand rate and lead times are random

Reorder point = expected demand during lead time + safety stock = [average
demand rate * average lead time] + standard normal deviate associated with the
cycle-service level * [(average lead time * variance of the demand rate) + ((average
demand rate) * variance of the lead time)]
2 0.5

US imports from Oklahoma City DC

Reorder point = (60*14) + 2.05*(14) (250/30 ) = 1190.08
0.5 0.5

Reorder point = (3.83*14) + 2.05*(14) (95/30 ) = 186.62

0.5 0.5

Reorder point = (22.5*14) + 1.28*(14) (85/30 ) = 389.33

0.5 0.5

Reorder point = 167.63

Reorder point = 109.07
Reorder point = 32.03
Reorder point = 123.68
Reorder point = 556.3
Reorder point = 892.36
Reorder point = 36.92