Question

Joe oversee the distribution of Little Debbie products from the plant warehouse to its two distribution centers in the U.S. The plant warehouse currently has 42,000 units of the company's most popular product, Nutty Bars. However, Joe retains 7,000 units of the products at the warehouse as a buffer (safety stock). The Cincinnati's Distribution Center has an inventory of 12,500 units and a daily requirement of 2,500 units. The Phoenix Distribution Center has an inventory of 6,000 units and a daily requirement of 2,000 units.   (a) Why is this a problem for the distribution centers . (b) How can Fair Share help this problem.   (c) Compute the common day's supply of Nutty Bar to each distribution center. (d) Use answer c to determine the number of Nutty Bars to allocate to each Cincinnati and Phoenix distribution center ....

Answer 1

Solution:

a) The above Situation demands for inventory planning in a careful manner. If planning doesnot occurs properly, then there are chances to the DC that will get less than the required and the Other more than required resulting in the Shortages in one and excess inventory because the exisiting inventory level and the demand at the DC are different.

b) The common tools for allocating inventory with fair share logic is to employ -

• The concept of a common day's supply, individual day's requirement, and individual inventories of the DCs at different locations.
• The concept of Distribution Requirement Planning (DRP) which is similar to the concept of MRP.

c) Common day's supply (DS) = [(42,000 - 7,000)+(12,500+6,000)] / (2,500 + 2,000) = 11.89 days.

d) Allocation=(Days’ Supply x Daily Requirements) - Inventory

Allocation at Cincinnati = (11.89 * 2,500) - 12,500 = 17,225 units

Allocation at Phoenix = (11.89 * 2,000) - 6,000 = 17,780 units.