Q2. A warehouse facilitates the reduction of the order cycle time of raw materials or consumer...

Q2. A warehouse facilitates the reduction of the order cycle time of raw materials or consumer goods required for a factory or retail outlet respectively.

Please explain how this is achieved. (30marks)

- Reduce travel time.

- Shift resources around the facility to the areas of the most activity.

- Throttle orders to areas that are underutilized and which have idle resources.

- Implement technology that will prevent stock outs and prioritize replenishments before they occur.

Solutions

Expert Solution

Order cycle time formula is Q/D where Q is the order quantity and D is the demand for the year. However, this also provides us ideas on how to reduce the order cycle time. Now, in order to reduce the order cycle time, the key activity that we should reduce the ordering quantity. Now in order to reduce the order quantity we could use the following approaches.

Reduce the ordering cost/transportation cost: The warehouse can provide a discounted transportation cost to the retail outlets. This will reduce their ordering cost and thus reduce the value of EOQ.

Increase the holding cost: The warehouse cannot directly influence the holding cost but can reduce the “Best used by date” period. This will force the retail outlets.

A warehouse typically functions as a hub-spoke model for a supply chain system. As a result, holding inventory and its responsibility is often distributed across the network. This brings down the overall ordering cost and the lead times. This in return reduces order cycle time.

keosha answered 1 month ago

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