Farah Qoonita Syuhaila

29120372
Operations Management

Overview of the case

In chinese pharma company, have a problem about the inventory and stock
management, they have huge on sales too but unable to manage their operational
issue

Problem statement

The problem statement derived from the case is described as below :

1. Determine the appropriate inventory management and forecasting tools for the
company to prevent predicament of stock

Problem- Solution
Sales forecasting for Chinese Pharmaceuticals (HK) Limited Effective
Forecasting for Optimal Inventory Management [ sales forecasting data]

Table 1. Partial Data of the forecasting and sales

Graph 1. Graph of the sales vs forecasting

In the graph 1 is described about the sales vs forecasting graph according to the
timeseries. Decomposition is a model that weight all observations equally to determine
the best regression fit of seasonally adjusted data. Base on case Chinese Pharmaceuticals
(HK) Limited Effective Forecasting for Optimal Inventory Management, their demand is
seasonal. The winter months leading up to the Chinese New Year Festival were the clear
peak season for sales of Noto37, with sales increasing as much as 50% above average
during the cold-weather season. Sales would then, ordinarily, decrease by as much as
50% below average during the subsequent spring season, while stabilizing toward their
annual average during the summer and autumn months.

Month and Year Period Sales forecast

Apr-12 34 8.432 8.393
May-12 35 7.455 8.432
Jun-12 36 5.346 8.432

total 239337,79

avg demand per day 221,6090657

standard deviation per month 1495,904063

Safety stock calculations- service level 95% the Z score is 0,14567
[calculation on excel)
1. Safety stock = z * gamma (dT.T)
2. = 0,14567 * (std.deviation/30(days)*100)
3. = 726,3611 pcs
The safety stock that should remain is 726,3611 pcs

Reorder point
1. Reorder point = ( avg daily demand * lead time in days)+ safety stock
2. = 20995+727
3. = 21.722 pcs

Conclusion
1. Chinese HK should creating a new warehouse regarding of the calculation of
order from forecasting
2. The safety stock that should remain per day in order to serve the customer is 727
pcs
3. And have the re-order point of 21,722 pcs