KEY Electronics - Sourcing and Warehouse Analysis

T. Kraft, Y.T. Chung, F. Erhun; Stanford University

This section provides a brief overview of the entire spreadsheet and an instruction on how
to use the interactive decision tool in the Solution tab.

Contents

1. Solution (and decision tool)

This tab provides the average annual procurement cost calculations for each SKU. The reader
can try the interactive decision tool to check the total costs including the average annual
procurement cost and the warehousing cost.

2. Appendix data
This tab contains all basic information regarding each SKU category such as physical
specifications, profit margins, duties, and demand distributions.

3. Appendix categories

This tab presents the number of SKUs in each category.

4. Appendix parameters

This tab contains all parameters needed for cost calculations of each sourcing option.
5. 3PL parameters

This tab contains the cost structure of the 3PL provider.

6. 3PL cost calculations

This tab provides the three cost calculations (storage cost, receiving cost, and shipping cost) for
the 3PL option.

7. Frequency calculations
This tab automatically calculates the number of pallets for each SKU in each week according to
the sourcing decision given in the Solution tab.

8. Warehouse parameters

This tab contains all information regarding the cost structure of the existing warehouse. The
reader can estimate the cost sturcture of the new warehouse option from this information.

9. Warehouse cost calculations

This tab automatically calculates the cost of the new warehouse option according to the sourcing
decision given in the Solution tab by considering the number of pallets in each week.

Instruction for the Interactive decision tool

The interactive decision tool is found on the Solution tab, from the column CJ to CQ. Please note
that the blue-colored cells named "decision variable cells" (CK3:CL12, and CQ3) are the only
input cells. All other cells (including cells in other tabs) will be adjusted automatically based on the
user's input. The user can input "1" to choose the option and "0" not to choose the option.
According to the user's input, all other cells will be updated and the total cost for the given option
will appear in cell CR13. The minimum cost sourcing strategy can be found in column CH.
 Weight
SKU KM Description Item Current Source (lbs)
2300105 BATERIA KY357 Batteries KEY 0.1
1609313 T.V. 25" SANYO TV Local 8.82
2780211 CONECTOR F-59 Cable/Connector KEY 0.01
1709786 TEL CEL SONY Z200 Cellphone KEY 0.6
6300612 PURIFICADOR DE AIRE Air Purifier KEY 8.08
1309034 KARAOKE JXOK5 Karaoke Machine Local 16.5
6509036 CALC.CIENT.SC OL153 Calculator Local 1.23
6109015 REGULADOR KOBLENZ BP1000 Surge Protector Local 0.96
4309113 TELEFONO ALAMBRICO GONDOL Telephone Local 1.50
2000234 RADIO FM YB400PE Radio KEY 3
 Sourcing + Warehouse Cost
SKU US Asia Local Best
Batteries 0 1 0 Asia
TV 0 0 1 Local Cts
Cable/Connector 0 0 1 Local Cts
Cellphone 0 0 1 Local Cts
Air Purifier 1 0 0 US
Karaoke Machine 0 0 1 Local Cts
Calculator 0 0 1 Local Cts
Surge Protector 1 0 0 US
Telephone 1 0 0 US
Radio 1 0 0 US
Total Sourcing
Decision Variable Cells
 Local US Asia
Volume Units/ Sales Price Base Unit Base Unit Base Unit Service level
(Cubic ft) Pallet ($) Cost ($) Cost ($) Cost ($) Duty (Type 1)
0.016 1,000 1.33 0.80 0.41 0.40 18% 0.98
2.08 8 176.94 129.17 116.78 115.01 30% 0.98
0.043 350 1.18 0.66 0.38 0.37 10% 0.9
0.13 128 142.22 128.00 108.09 106.67 35% 0.98
1.36 8 166.67 116.67 93.33 91.67 15% 0.95
3.5 4 138.89 108.33 75.00 73.61 50% 0.95
0.2 80 16.28 10.42 8.46 8.30 25% 0.95
0.08 200 20.51 13.33 8.41 8.21 13% 0.95
0.14 115 9.49 6.83 4.46 4.37 23% 0.98
0.16 100 174.39 148.23 120.33 118.58 20% 0.95
Procureme Warehousing Cost
#REF! 0
#REF!
#REF! WHSE
#REF!
#REF!
#REF!
#REF! 1
#REF!
#REF! 3PL
#REF!
#REF!
#REF! TOTAL
#REF! Total Whse #REF! #REF!

Fixed Cost for WHSE #REF!

Variable Cost for WHSE #REF!
TOTAL #REF!

3PL Storage #REF!

3PL Receiving #REF!
3PL Shipping #REF!

TOTAL #REF!
 Projected 2012 Duty & Labeling

Mean Demand Std Dev of Unit Costs Unit Costs Asia * Unit Costs (US) +
(Month) Demand (Month) US*Duty Duty Labeling (US)
1,800 250 0.48 0.47 0.62
115 95 151.81 149.51 151.95
675 85 0.42 0.41 0.56
152 69 145.92 144.00 146.06
125 45 107.33 105.42 107.47
30 16 112.50 110.42 112.64
108 65 10.58 10.38 10.72
540 270 9.50 9.28 9.64
910 334 5.49 5.38 5.63
38 17 144.40 142.30 144.54
g Transportation EOQ

Unit Costs (Asia) + Unit Costs (US) + Unit Costs (Asia) +

Labeling (Asia) Transp (US) Transp (Asia) EOQ (Local) EOQ (US)
0.49 0.64 0.54 246 1147
149.53 153.19 154.86 5 19
0.43 0.56 0.52 166 750
144.02 146.15 144.36 6 22
105.44 108.60 109.20 5 23
110.44 114.95 119.59 3 11
10.40 10.89 10.95 17 68
9.30 9.78 9.58 33 161
5.40 5.84 5.86 60 270
142.32 144.96 143.00 3 11
EOQ T

Lead Time
EOQ (Asia) T (Local) - Mos T (US) - Mos T (Asia) - Mos Demand (Local)
2014 0.14 0.64 1.12 178
30 0.04 0.16 0.26 11
1257 0.25 1.11 1.86 67
36 0.04 0.14 0.23 15
37 0.04 0.19 0.30 12
17 0.09 0.37 0.58 3
109 0.15 0.63 1.01 11
261 0.06 0.30 0.48 53
433 0.07 0.30 0.48 90
18 0.07 0.29 0.47 4

Asia
US
Local
 Lead Time

Lead Time Lead Time Lead Time Lead Time Lead Time
StdDev (Local) Demand (US) StdDev (US) Demand (Asia) StdDev (Asia)
79 828 186 3847 552
30 53 65 246 141
27 311 64 1442 199
22 70 47 325 107
14 58 31 267 72
5 14 11 64 24
20 50 44 231 98
85 249 185 1154 414
105 419 230 1945 531
5 17 12 81 26

LT (Days) LT (Mos) LT StdDev (Days) LT StdDev (Mos)

65 2.137 7 0.23
14 0.46 1.3 0.04
3 0.10 - -
 Reorder Point (R) Safety Stock

Safety Stock
R (Local) R (US) R (Asia) (Local) Safety Stock (US)
339 1211 4981 161 382
73 186 536 61 133
101 393 1697 34 83
59 167 544 45 97
36 109 385 23 51
11 32 104 8 18
44 123 392 34 73
193 552 1835 139 304
305 891 3036 215 472
13 37 125 9 19
ety Stock Hold Cost Order Cost

Safety Stock Order Cost

(Asia) Hold Cost (Local) Hold Cost (US) Hold Cost (Asia) (Local)
1135 $57 $152 $287 $17,280
290 $2,058 $5,442 $11,821 $178,255
255 $19 $64 $114 $5,346
219 $1,515 $3,949 $8,557 $233,472
118 $756 $1,699 $3,732 $175,005
40 $261 $675 $1,460 $38,999
162 $109 $291 $592 $13,504
681 $520 $939 $1,942 $86,378
1091 $419 $886 $1,917 $74,584
43 $374 $895 $1,870 $67,593
 Order Cost Setup Cost

Setup Cost
Order Cost (US) Order Cost (Asia) (Local) Setup Cost (US) Setup Cost (Asia)
$13,776 $11,595 $25 $91 $135
$211,401 $213,700 $79 $358 $580
$4,531 $4,182 $14 $52 $81
$266,569 $263,318 $90 $402 $644
$162,901 $163,797 $78 $315 $508
$41,382 $43,052 $37 $159 $260
$14,110 $14,195 $22 $93 $150
$63,359 $62,056 $55 $196 $313
$63,727 $64,014 $51 $197 $318
$66,100 $65,210 $49 $200 $320
Loss Fxn Penalty Cost Total Cost (Q,R)

Penalty Cost Penalty Cost Penalty Cost Total Cost Cts

L(z) (Local) (US) (Asia) (Local)
0.0073 $6 $11 $27 $17,367
0.0073 $354 $909 $2,010 $180,745
0.0473 $2 $4 $12 $5,381
0.0073 $255 $634 $1,415 $235,332
0.0209 $172 $352 $819 $176,012
0.0209 $57 $131 $305 $39,353
0.0209 $22 $50 $112 $13,657
0.0209 $118 $189 $414 $87,071
0.0073 $66 $123 $286 $75,119
0.0209 $83 $176 $394 $68,098
Total Cost (Q,R) T

Total Cost Cts Total Cost Cts T (Local) -

(US) (Asia) Optimal T Adj (US) T Adj (Asia)
$15,031 $13,045 0.14 0.46 0.92
$219,110 $229,111 0.04 0.46 0.92
$5,652 $5,390 0.25 0.92 1.85
$272,554 $274,934 0.04 0.46 0.92
$166,266 $169,856 0.04 0.46 0.92
$43,347 $46,077 0.09 0.46 0.92
$15,544 $16,048 0.15 0.46 0.92
$65,683 $65,724 0.06 0.46 0.92
$65,932 $67,534 0.07 0.46 0.92
$68,371 $68,794 0.07 0.46 0.92

Order Intervals Weeks Mos

US 2.0 0.46
Asia 4.0 0.92

US Asia
0.46 0.92
0.92 1.85
1.38 2.77
1.85 3.69
2.31 4.62
2.77 5.54
3.23 6.46
3.69 7.38
4.15 8.31
4.62 9.23
 EOQ Lead Time

Lead Time Lead Time Lead Time

EOQ (US) EOQ(Asia) StdDev (Local) StdDev (US) StdDev (Asia)
831 1662 121 252 602
53 106 36 91 168
623 1246 50 104 230
70 140 25 67 126
58 115 17 44 84
14 28 7 15 29
50 100 33 63 116
249 498 108 260 488
420 840 135 323 621
18 35 7 16 31
 Safety Stock Hold Cost

Safety Stock Prd Safety Stock Prd Safety Stock Prd

(Local) (US) (Asia) Hold Cost (Local) Hold Cost (US)
249.0 517.7 1237.1 $74 $149
73.3 187.6 345.6 $2,446 $8,201
63.9 133.3 294.8 $24 $62
52.2 136.7 258.1 $1,761 $6,276
27.8 71.6 137.9 $891 $2,727
11.5 25.4 47.4 $347 $928
53.8 102.9 191.4 $162 $348
177.5 428.1 803.3 $646 $1,351
278.1 663.4 1274.7 $526 $1,274
11.5 27.0 51.0 $473 $1,296

S*
US Asia
2,177 6,745
294 698
1,067 2,983
277 723
187 520
53 139
202 522
926 2,456
1,502 4,059
62 167
old Cost Order Cost Setup Cost

Order Cost Setup Cost

Hold Cost (Asia) (Local) Order Cost (US) Order Cost (Asia) (Local)
$278 $17,280 $13,776 $11,595 $25
$15,434 $178,255 $211,401 $213,700 $79
$118 $5,346 $4,531 $4,182 $14
$11,847 $233,472 $266,569 $263,318 $90
$5,338 $175,005 $162,901 $163,797 $78
$1,832 $38,999 $41,382 $43,052 $37
$661 $13,504 $14,110 $14,195 $22
$2,520 $86,378 $63,359 $62,056 $55
$2,484 $74,584 $63,727 $64,014 $51
$2,450 $67,593 $66,100 $65,210 $49
 Setup Cost Penalty Cost

Penalty Cost Penalty Cost Penalty Cost

Setup Cost (US) Setup Cost (Asia) (Local) (US) (Asia)
$126 $164 $9 $15 $30
$126 $164 $423 $1,284 $2,392
$63 $82 $4 $7 $14
$126 $164 $299 $893 $1,665
$126 $164 $206 $494 $956
$126 $164 $79 $185 $360
$126 $164 $36 $71 $133
$126 $164 $150 $266 $489
$126 $164 $85 $173 $334
$126 $164 $108 $248 $463
 Total Category Cost (Periodic) (Continuous) Recommendations

Total Cost Prd Total Cost Prd Total Cost Prd Total Cost Cts Recommended
(Local) (US) (Asia) (Local) (Sourcing only)
$869,395 $753,318 $653,294 $868,360 Asia
$1,812,030 $2,220,120 $2,326,905 $1,807,450 Local Cts
$285,553 $300,162 $286,034 $285,198 Local Cts
$4,712,452 $5,497,302 $5,559,876 $4,706,631 Local Cts
$2,642,703 $2,508,729 $2,568,831 $2,640,177 US
$591,928 $654,316 $696,120 $590,301 Local Cts
$205,853 $234,830 $242,283 $204,862 Local Cts
$8,723,015 $6,610,271 $6,622,806 $8,707,125 US
$902,947 $795,607 $815,946 $901,433 US
$682,223 $687,702 $692,865 $680,983 Local Cts
Single SKU Cost (Periodic) (Continuous) Total
$17,388 $15,066 $13,066 $17,367 $13,066
$181,203 $222,012 $232,691 $180,745 $180,745
$5,388 $5,663 $5,397 $5,381 $5,381
$235,623 $274,865 $277,994 $235,332 $235,332
$176,180 $167,249 $171,255 $176,012 $167,249
$39,462 $43,621 $46,408 $39,353 $39,353
$13,724 $15,655 $16,152 $13,657 $13,657
$87,230 $66,103 $66,228 $87,071 $66,103
$75,246 $66,301 $67,996 $75,119 $66,301
$68,222 $68,770 $69,287 $68,098 $68,098
Recommendations Sourcing + Warehouse Cost

Sourcing Cost (w/o

warehouse) SKU US Asia Local
$653,294 Batteries 0 1 0
$1,807,450 TV 0 0 1
$285,198 Cable/Connector 0 0 1
$4,706,631 Cellphone 0 0 1
$2,508,729 Air Purifier 1 0 0
$590,301 Karaoke Machine 0 0 1
$204,862 Calculator 0 0 1
$6,610,271 Surge Protector 1 0 0
$795,607 Telephone 1 0 0
$680,983 Radio 0 0 1
$18,843,326
Decision Variable Cells

Min Unit Cost Unit Cost Solution

0.58 Asia
129.17 Local
0.64 Asia
128.00 Local
109.27 US
108.33 Local
10.42 Local
9.73 Asia
5.93 US
145.20 Asia
cing + Warehouse Cost

Procurement
Best Option Cost Warehousing Cost
Asia $653,294 1
Local Cts $1,807,450
Local Cts $285,198 WHSE
$378,107
Local Cts $4,706,631
US $2,508,729
Local Cts $590,301 0
Local Cts $204,862
US $6,610,271 3PL
$0
US $795,607
Local Cts $680,983 TOTAL
Total Sourcing $18,843,326 Total Whse $378,107 $19,221,432
WHSE Avg Utiliz 49%

Fixed Cost for WHSE $251,400

Variable Cost for WHSE $126,707
TOTAL $378,107

3PL Storage $186,927

3PL Receiving $89,889
3PL Shipping $102,375
TOTAL $379,190
 Pallets on-hand
Pallets Current
received per Sourcing
T Min Max Avg year Projected Cost
0.92 83 145 114 1,092 $753,318
0.04 83 83 83 1,974 $1,807,450
0.25 7 30 18 1,274 $300,162
0.04 8 8 8 323 $5,497,302
0.46 188 242 215 2,834 $2,508,729
0.09 41 41 41 1,452 $590,301
0.15 9 9 9 312 $204,862
0.46 276 339 308 3,250 $8,707,125
0.46 91 113 102 1,144 $901,433
0.07 1 1 1 174 $687,702
787 1,012 900 13,829 $21,958,384
 Selected
Sourcing
Projected Cost
$653,294
$1,807,450
$285,198
$4,706,631
$2,508,729
$590,301
$204,862
$6,610,271
$795,607 Savings from
$680,983 sourcing
$18,843,326 $3,115,059
 Current Weight Volume
SKU KM Description Item Source (lbs) (Cubic ft)
2300105 BATERIA KY357 Batteries KEY 0.10 0.016
1609313 T.V. 25" SANYO TV Local 8.82 2.08
2780211 CONECTOR F-59 Cable/Connector KEY 0.01 0.043
1709786 TEL CEL SONY Z200 Cellphone KEY 0.60 0.13
6300612 PURIFICADOR DE AIRE Air Purifier KEY 8.08 1.36
1309034 KARAOKE JXOK5 Karaoke Machine Local 16.50 3.50
6509036 CALC.CIENT.SC OL153 Calculator Local 1.23 0.20
6109015 REGULADOR KOBLENZ BP1000 Surge Protector Local 0.96 0.08
4309113 TELEFONO ALAMBRICO GONDOL Telephone Local 1.50 0.14
2000234 RADIO FM YB400PE Radio KEY 3.00 0.16
 Projected 2012
Local US Asia Service Mean Std Dev of
Units/ Sales Base Unit Base Unit Base Unit Level Demand Demand
Pallet Price ($) Cost ($) Cost ($) Cost ($) Duty (Type 1) (Month) (Month)
1,000 1.33 0.80 0.41 0.40 18% 0.98 1,800 250
8 176.94 129.17 116.78 115.01 30% 0.98 115 95
350 1.18 0.66 0.38 0.37 10% 0.90 675 85
128 142.22 128.00 108.09 106.67 35% 0.98 152 69
8 166.67 116.67 93.33 91.67 15% 0.95 125 45
4 138.89 108.33 75.00 73.61 50% 0.95 30 16
80 16.28 10.42 8.46 8.30 25% 0.95 108 65
200 20.51 13.33 8.41 8.21 13% 0.95 540 270
115 9.49 6.83 4.46 4.37 23% 0.98 910 334
100 174.39 148.23 120.33 118.58 20% 0.95 38 17
SKU Category1 Description Number of SKUs SKU Category (re-order)
13 Music 15 2300105
16 TV, DVD 10 1609313
17 Cell phones 20 2780211
20 Antennas, Short-wave radios 10 1709786
23 Batteries 50 6300612
27 Fuses, adapters 53 1309034
43 Telephones 12 6509036
61 Surge protectors 100 6109015
63 Gadgets 15 4309113
65 Calculators 15 2000234
Total 300 Total
1
SKU Category = First two digits of SKU number
Number of SKUs
50
10
53
20
15
15
15
100
12
10
300
 General Lead Times/Replenishment (Days)
Annual Holding Cost Interest Rate 25.00% Asia
Asia (Std. Deviation)
Ocean Freight OKC
$/Cubic ft $2.05 OKC (Std. Deviation)
Local
US Shipping
$/lb (OKC to Border) $0.05 Mexico Shipping
$/lb (Border to Mexico City)
$/lb (Manzanillo to Mexico City)
ishment (Days) Order Costs (per SKU)
65 Asia $12.60
7 US $4.86
14 Local $0.28
1.3
3 Labeling
Cost per unit (Asia) $0.02
ipping Cost per unit (OKC) $0.14
$0.09
$0.12
 3PL Pricing
Description Value
Receiving cost/pallet1 $6.50
Shipping cost/replenishment2 $11.25
Avg. orders per week/per store 2.5
Storage cost/pallet per week3 Incremental quantity
Pallets on-hand (x) discount
x < 1000 $4.00 Used in formulas
1000 ≤ x < 1200 $2.75 1000 $4,000
1200 ≤ x < 1400 $1.50 1200 $4,550
1400 ≤ x $0.75 1400 $4,850
1
includes cost to receive and putaway pallets
2
includes cost to pick, prep, and ship a replenishment (i.e., a store order)
3
weekly inventory snap-shot taken on Friday
 3PL Storage Cost Calculations
Week 1 2 3 4 5 6 7 8
Cost $4,032 $3,316 $3,881 $3,150 $4,032 $3,316 $3,881 $3,150
Cost_H $4,047 $3,316 $3,881 $3,150 $4,047 $3,316 $3,881 $3,150
Cost_M2 $4,032 $3,530 $3,918 $3,416 $4,032 $3,530 $3,918 $3,416
Cost_M1 $4,268 $3,994 $4,205 $3,931 $4,268 $3,994 $4,205 $3,931
Cost_L $4,559 $4,422 $4,528 $4,391 $4,559 $4,422 $4,528 $4,391

Storage Cost $186,927

3PL Receiving Cost Calculations

Pallets/
Weeks Receipt Pallets
between Receipts Units/ (SKU received
SKU Source replens per year Q Pallet Category) per year
2300105 Asia 4.00 13 1662 1000 84 1,092
1609313 Local Cts 0.18 282 5 8 7 1,974
2780211 Local Cts 1.06 49 166 350 26 1,274
1709786 Local Cts 0.16 323 6 128 1 323
6300612 US 2.00 26 58 8 109 2,834
1309034 Local Cts 0.39 132 3 4 11 1,452
6509036 Local Cts 0.67 78 17 80 4 312
6109015 US 2.00 26 249 200 125 3,250
4309113 US 2.00 26 420 115 44 1,144
2000234 Local Cts 0.30 174 3 100 1 174
Total pallets received 13,829
Cost/Pallet $6.50
Receiving Cost $89,889

3PL Shipping Cost Calculations

70 Stores
x 2.5 Replen/wk/store
x 52 weeks/year
9100 Replens/yr
x $11.25 Cost/Replen
$102,375 Shipping Cost

3PL Cost
Storage $186,927
Receiving $89,889
Shipping $102,375
Total Cost $379,190
 9 10 11 12 13 14 15 16 17
$4,032 $3,316 $3,881 $3,150 $4,032 $3,316 $3,881 $3,150 $4,032
$4,047 $3,316 $3,881 $3,150 $4,047 $3,316 $3,881 $3,150 $4,047
$4,032 $3,530 $3,918 $3,416 $4,032 $3,530 $3,918 $3,416 $4,032
$4,268 $3,994 $4,205 $3,931 $4,268 $3,994 $4,205 $3,931 $4,268
$4,559 $4,422 $4,528 $4,391 $4,559 $4,422 $4,528 $4,391 $4,559
 18 19 20 21 22 23 24 25 26
$3,316 $3,881 $3,150 $4,032 $3,316 $3,881 $3,150 $4,032 $3,316
$3,316 $3,881 $3,150 $4,047 $3,316 $3,881 $3,150 $4,047 $3,316
$3,530 $3,918 $3,416 $4,032 $3,530 $3,918 $3,416 $4,032 $3,530
$3,994 $4,205 $3,931 $4,268 $3,994 $4,205 $3,931 $4,268 $3,994
$4,422 $4,528 $4,391 $4,559 $4,422 $4,528 $4,391 $4,559 $4,422
 27 28 29 30 31 32 33 34 35
$3,881 $3,150 $4,032 $3,316 $3,881 $3,150 $4,032 $3,316 $3,881
$3,881 $3,150 $4,047 $3,316 $3,881 $3,150 $4,047 $3,316 $3,881
$3,918 $3,416 $4,032 $3,530 $3,918 $3,416 $4,032 $3,530 $3,918
$4,205 $3,931 $4,268 $3,994 $4,205 $3,931 $4,268 $3,994 $4,205
$4,528 $4,391 $4,559 $4,422 $4,528 $4,391 $4,559 $4,422 $4,528
 36 37 38 39 40 41 42 43 44
$3,150 $4,032 $3,316 $3,881 $3,150 $4,032 $3,316 $3,881 $3,150
$3,150 $4,047 $3,316 $3,881 $3,150 $4,047 $3,316 $3,881 $3,150
$3,416 $4,032 $3,530 $3,918 $3,416 $4,032 $3,530 $3,918 $3,416
$3,931 $4,268 $3,994 $4,205 $3,931 $4,268 $3,994 $4,205 $3,931
$4,391 $4,559 $4,422 $4,528 $4,391 $4,559 $4,422 $4,528 $4,391
 45 46 47 48 49 50 51 52
$4,032 $3,316 $3,881 $3,150 $4,032 $3,316 $3,881 $3,150
$4,047 $3,316 $3,881 $3,150 $4,047 $3,316 $3,881 $3,150
$4,032 $3,530 $3,918 $3,416 $4,032 $3,530 $3,918 $3,416
$4,268 $3,994 $4,205 $3,931 $4,268 $3,994 $4,205 $3,931
$4,559 $4,422 $4,528 $4,391 $4,559 $4,422 $4,528 $4,391
 SKU Source Q SS Units/Pallet T (weeks) 1 2 3
2300105 Asia 1662 1237 1000 4.00 2.9 2.5 2.1
1609313 Local Cts 5 61 8 0.18 8.3 8.3 8.3
2780211 Local Cts 166 34 350 1.06 0.6 0.1 0.6
1709786 Local Cts 6 45 128 0.16 0.4 0.4 0.4
6300612 US 58 72 8 2.00 16.2 12.6 16.2
1309034 Local Cts 3 8 4 0.39 2.7 2.7 2.7
6509036 Local Cts 17 34 80 0.67 0.6 0.6 0.6
6109015 US 249 428 200 2.00 3.4 2.8 3.4
4309113 US 420 663 115 2.00 9.4 7.6 9.4
2000234 Local Cts 3 9 100 0.30 0.1 0.1 0.1

1.00 0.75 0.50

1.00 1.00 1.00
1.00 0.06 1.00
1.00 1.00 1.00
1.00 0.50 1.00
1.00 1.00 1.00
1.00 1.00 1.00
1.00 0.50 1.00
1.00 0.50 1.00
1.00 1.00 1.00
 4 5 6 7 8 9 10 11 12
1.7 2.9 2.5 2.1 1.7 2.9 2.5 2.1 1.7
8.3 8.3 8.3 8.3 8.3 8.3 8.3 8.3 8.3
0.1 0.6 0.1 0.6 0.1 0.6 0.1 0.6 0.1
0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4
12.6 16.2 12.6 16.2 12.6 16.2 12.6 16.2 12.6
2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.7
0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6
2.8 3.4 2.8 3.4 2.8 3.4 2.8 3.4 2.8
7.6 9.4 7.6 9.4 7.6 9.4 7.6 9.4 7.6
0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

0.25 1.00 0.75 0.50 0.25 1.00 0.75 0.50 0.25

1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
0.06 1.00 0.06 1.00 0.06 1.00 0.06 1.00 0.06
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
0.50 1.00 0.50 1.00 0.50 1.00 0.50 1.00 0.50
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
0.50 1.00 0.50 1.00 0.50 1.00 0.50 1.00 0.50
0.50 1.00 0.50 1.00 0.50 1.00 0.50 1.00 0.50
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
 13 14 15 16 17 18 19 20 21
2.9 2.5 2.1 1.7 2.9 2.5 2.1 1.7 2.9
8.3 8.3 8.3 8.3 8.3 8.3 8.3 8.3 8.3
0.6 0.1 0.6 0.1 0.6 0.1 0.6 0.1 0.6
0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4
16.2 12.6 16.2 12.6 16.2 12.6 16.2 12.6 16.2
2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.7
0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6
3.4 2.8 3.4 2.8 3.4 2.8 3.4 2.8 3.4
9.4 7.6 9.4 7.6 9.4 7.6 9.4 7.6 9.4
0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

1.00 0.75 0.50 0.25 1.00 0.75 0.50 0.25 1.00

1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
1.00 0.06 1.00 0.06 1.00 0.06 1.00 0.06 1.00
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
1.00 0.50 1.00 0.50 1.00 0.50 1.00 0.50 1.00
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
1.00 0.50 1.00 0.50 1.00 0.50 1.00 0.50 1.00
1.00 0.50 1.00 0.50 1.00 0.50 1.00 0.50 1.00
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
 22 23 24 25 26 27 28 29 30
2.5 2.1 1.7 2.9 2.5 2.1 1.7 2.9 2.5
8.3 8.3 8.3 8.3 8.3 8.3 8.3 8.3 8.3
0.1 0.6 0.1 0.6 0.1 0.6 0.1 0.6 0.1
0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4
12.6 16.2 12.6 16.2 12.6 16.2 12.6 16.2 12.6
2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.7
0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6
2.8 3.4 2.8 3.4 2.8 3.4 2.8 3.4 2.8
7.6 9.4 7.6 9.4 7.6 9.4 7.6 9.4 7.6
0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

0.75 0.50 0.25 1.00 0.75 0.50 0.25 1.00 0.75

1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
0.06 1.00 0.06 1.00 0.06 1.00 0.06 1.00 0.06
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
0.50 1.00 0.50 1.00 0.50 1.00 0.50 1.00 0.50
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
0.50 1.00 0.50 1.00 0.50 1.00 0.50 1.00 0.50
0.50 1.00 0.50 1.00 0.50 1.00 0.50 1.00 0.50
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
 31 32 33 34 35 36 37 38 39
2.1 1.7 2.9 2.5 2.1 1.7 2.9 2.5 2.1
8.3 8.3 8.3 8.3 8.3 8.3 8.3 8.3 8.3
0.6 0.1 0.6 0.1 0.6 0.1 0.6 0.1 0.6
0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4
16.2 12.6 16.2 12.6 16.2 12.6 16.2 12.6 16.2
2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.7
0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6
3.4 2.8 3.4 2.8 3.4 2.8 3.4 2.8 3.4
9.4 7.6 9.4 7.6 9.4 7.6 9.4 7.6 9.4
0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

0.50 0.25 1.00 0.75 0.50 0.25 1.00 0.75 0.50

1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
1.00 0.06 1.00 0.06 1.00 0.06 1.00 0.06 1.00
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
1.00 0.50 1.00 0.50 1.00 0.50 1.00 0.50 1.00
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
1.00 0.50 1.00 0.50 1.00 0.50 1.00 0.50 1.00
1.00 0.50 1.00 0.50 1.00 0.50 1.00 0.50 1.00
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
 40 41 42 43 44 45 46 47 48
1.7 2.9 2.5 2.1 1.7 2.9 2.5 2.1 1.7
8.3 8.3 8.3 8.3 8.3 8.3 8.3 8.3 8.3
0.1 0.6 0.1 0.6 0.1 0.6 0.1 0.6 0.1
0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4
12.6 16.2 12.6 16.2 12.6 16.2 12.6 16.2 12.6
2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.7
0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6
2.8 3.4 2.8 3.4 2.8 3.4 2.8 3.4 2.8
7.6 9.4 7.6 9.4 7.6 9.4 7.6 9.4 7.6
0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

0.25 1.00 0.75 0.50 0.25 1.00 0.75 0.50 0.25

1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
0.06 1.00 0.06 1.00 0.06 1.00 0.06 1.00 0.06
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
0.50 1.00 0.50 1.00 0.50 1.00 0.50 1.00 0.50
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
0.50 1.00 0.50 1.00 0.50 1.00 0.50 1.00 0.50
0.50 1.00 0.50 1.00 0.50 1.00 0.50 1.00 0.50
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
 49 50 51 52
2.9 2.5 2.1 1.7
8.3 8.3 8.3 8.3
0.6 0.1 0.6 0.1
0.4 0.4 0.4 0.4
16.2 12.6 16.2 12.6
2.7 2.7 2.7 2.7
0.6 0.6 0.6 0.6
3.4 2.8 3.4 2.8
9.4 7.6 9.4 7.6
0.1 0.1 0.1 0.1

1.00 0.75 0.50 0.25

1.00 1.00 1.00 1.00
1.00 0.06 1.00 0.06
1.00 1.00 1.00 1.00
1.00 0.50 1.00 0.50
1.00 1.00 1.00 1.00
1.00 1.00 1.00 1.00
1.00 0.50 1.00 0.50
1.00 0.50 1.00 0.50
1.00 1.00 1.00 1.00
 Warehouse Parameters
Description Value
Capacity in pallets 1,850 Whse Fixed Cost
Square feet 40,000 Rent $150,000
Rent ($/Sq ft per year) $3.75 Salaries $101,400
Salary per: $251,400
Manager (1 in total) $30,000
Supervisor (4 in total) $12,000
Benefits (% applied to salary) 30%

Week
 High 0.85 0.85 0.85 0.85 0.85 0.85 0.85 0.85 0.85 0.85 0.85
Mid 100% 0.65 0.65 0.65 0.65 0.65 0.65 0.65 0.65 0.65 0.65 $3,500
0.65
Low 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45
90% $3,000
85% Capacity

80% $2,500
Capacity Utilization

Variable Cost
70% $2,000
65% Capacity

60% $1,500

50% $1,000
45% Capacity

40% $500

30% $0
1 2 3 4 5 6 7 8 9 10 11 12
Week

Capacity Utilization Variable Cost April - June (2007)

Week 1 2 3 4 5 6 7 8 9 10 11
Variable
$3,200 $2,400 $2,350 $2,400 $1,600 $2,400 $525 $1,700 $500 $3,400 $2,350
Cost
Capacity
Utilization 90% 75% 68% 80% 55% 68% 40% 58% 42% 95% 78%
 0.85
0.65
0.45 Capacity Range Old VC Scaled Improve
x>=.85 0.85 $3,300 $8,800 $7,480
.65<=x<.85 0.65 $2,350 $6,267 $5,327
.45<=x<.65 0.45 $1,650 $4,400 $3,740
x<.45 $500 $1,333 $1,133
Variable Cost

Scale 2.7
Improve 15%

June (2007)
12
$1,660

58%
 SKU Description Best Option Review Freq
2300105 BATERIA KY357 Asia 0.92
1609313 T.V. 25" SANYO Local Cts 0.04
2780211 CONECTOR F-59 Local Cts 0.25
1709786 TEL CEL SONY Z200 Local Cts 0.04
6300612 PURIFICADOR DE AIRE US 0.46
1309034 KARAOKE JXOK5 Local Cts 0.09
6509036 CALC.CIENT.SC OL153 Local Cts 0.15
6109015 REGULADOR KOBLENZ BP1000 US 0.46
4309113 TELEFONO ALAMBRICO GONDOL US 0.46
2000234 RADIO FM YB400PE Local Cts 0.07

Fixed Cost $251,400

Variable Cost $126,707
Total Warehouse Cost $378,107

Projected Pallets on-hand

1,200

1,000

800
Pallets

600

400

200

0
1 8 15 22 29 36 43
Week
 Week
SKUs/Category 1 2 3 4 5
50 145 124 103 83 145
10 83 83 83 83 83
53 30 7 30 7 30
20 8 8 8 8 8
15 242 188 242 188 242
15 41 41 41 41 41
15 9 9 9 9 9
100 339 276 339 276 339
12 113 91 113 91 113
10 1 1 1 1 1
Total Pallets 1,012 829 970 787 1,012
Weekly Whse VC $3,740 $1,133 $3,740 $1,133 $3,740
Utilization 55% 45% 52% 43% 55%
Pallet Capacity 1,850

50
 6 7 8 9 10 11 12 13
124 103 83 145 124 103 83 145
83 83 83 83 83 83 83 83
7 30 7 30 7 30 7 30
8 8 8 8 8 8 8 8
188 242 188 242 188 242 188 242
41 41 41 41 41 41 41 41
9 9 9 9 9 9 9 9
276 339 276 339 276 339 276 339
91 113 91 113 91 113 91 113
1 1 1 1 1 1 1 1
829 970 787 1,012 829 970 787 1,012
$1,133 $3,740 $1,133 $3,740 $1,133 $3,740 $1,133 $3,740
45% 52% 43% 55% 45% 52% 43% 55%
 14 15 16 17 18 19 20 21 22
124 103 83 145 124 103 83 145 124
83 83 83 83 83 83 83 83 83
7 30 7 30 7 30 7 30 7
8 8 8 8 8 8 8 8 8
188 242 188 242 188 242 188 242 188
41 41 41 41 41 41 41 41 41
9 9 9 9 9 9 9 9 9
276 339 276 339 276 339 276 339 276
91 113 91 113 91 113 91 113 91
1 1 1 1 1 1 1 1 1
829 970 787 1,012 829 970 787 1,012 829
$1,133 $3,740 $1,133 $3,740 $1,133 $3,740 $1,133 $3,740 $1,133
45% 52% 43% 55% 45% 52% 43% 55% 45%
 23 24 25 26 27 28 29 30 31
103 83 145 124 103 83 145 124 103
83 83 83 83 83 83 83 83 83
30 7 30 7 30 7 30 7 30
8 8 8 8 8 8 8 8 8
242 188 242 188 242 188 242 188 242
41 41 41 41 41 41 41 41 41
9 9 9 9 9 9 9 9 9
339 276 339 276 339 276 339 276 339
113 91 113 91 113 91 113 91 113
1 1 1 1 1 1 1 1 1
970 787 1,012 829 970 787 1,012 829 970
$3,740 $1,133 $3,740 $1,133 $3,740 $1,133 $3,740 $1,133 $3,740
52% 43% 55% 45% 52% 43% 55% 45% 52%
 32 33 34 35 36 37 38 39 40
83 145 124 103 83 145 124 103 83
83 83 83 83 83 83 83 83 83
7 30 7 30 7 30 7 30 7
8 8 8 8 8 8 8 8 8
188 242 188 242 188 242 188 242 188
41 41 41 41 41 41 41 41 41
9 9 9 9 9 9 9 9 9
276 339 276 339 276 339 276 339 276
91 113 91 113 91 113 91 113 91
1 1 1 1 1 1 1 1 1
787 1,012 829 970 787 1,012 829 970 787
$1,133 $3,740 $1,133 $3,740 $1,133 $3,740 $1,133 $3,740 $1,133
43% 55% 45% 52% 43% 55% 45% 52% 43%
 41 42 43 44 45 46 47 48 49
145 124 103 83 145 124 103 83 145
83 83 83 83 83 83 83 83 83
30 7 30 7 30 7 30 7 30
8 8 8 8 8 8 8 8 8
242 188 242 188 242 188 242 188 242
41 41 41 41 41 41 41 41 41
9 9 9 9 9 9 9 9 9
339 276 339 276 339 276 339 276 339
113 91 113 91 113 91 113 91 113
1 1 1 1 1 1 1 1 1
1,012 829 970 787 1,012 829 970 787 1,012
$3,740 $1,133 $3,740 $1,133 $3,740 $1,133 $3,740 $1,133 $3,740
55% 45% 52% 43% 55% 45% 52% 43% 55%
 50 51 52
124 103 83
83 83 83
7 30 7
8 8 8
188 242 188
41 41 41
9 9 9
276 339 276
91 113 91
1 1 1
829 970 787
$1,133 $3,740 $1,133
45% 52% 43%