Student Name: Vũ Hoàng Lam

Student ID: IELSIU19036

LOGISTICS ENGINEERING & SUPPLY CHAIN DESIGN

HOMEWORK 7

Question 1:
Icie is a chain of retail stores that sells 32 flavors of slushy – a partially frozen drink made
with crushed ice and fruit-flavored syrup. The weekly demand for each flavor of slushy is
independent and is normally distributed with N(100,121). The replenishment lead time from
the factory is three weeks and Icie aims for a customer service level of 95%.
a. How much safety stock will Icie have to hold if the slushies are mixed at the factory
and held in inventory at the retail store as individual flavors?
−1
𝑠𝑠 = 𝑘 × 𝐹𝑠 × (𝐶𝑆𝐿) 𝐿σ𝐷 = 32 × 𝑁𝑂𝑅𝑀𝑆𝐼𝑁𝑉(0. 95) × √3 × √121 = 1003 𝑢𝑛𝑖𝑡𝑠
b. How does the safety stock requirement change if Icie holds the crushed ice and adds
the fruit-flavored syrup on demand?
−1
𝑠𝑠 = 𝑘 × 𝐹𝑠 × (𝐶𝑆𝐿) 𝐿𝑘σ𝐷 = 𝑁𝑂𝑅𝑀𝑆𝐼𝑁𝑉(0. 95) × 3 × 32 × 121 = 178 𝑢𝑛𝑖𝑡𝑠
c. Based on the results of part a and b, which strategy should Icie use to optimize the
amount of safety stock? Why?
Sinc the disparity of the two stategy is 825 units, the Icie should use the second
stategy to optimize its amount of safety stock since it can save 825 units of inventory.
(Requirement: Show step-by-step manual calculation for this problem)

Question 2:
a. What are the benefits and drawbacks of postponement?
Benefit
● Minimize wrong inventory, expedited shipping costs and obsolete and
markdown products.
● The use of low-cost country manufacturing of components becomes more
effective.
● More options are available to customers without increasing costs.
● Global markets are reached faster, with fewer assets and capital.
● Richer customer insights are gained for new products.
● There is the ability to focus on innovation and product design for supply.
● There is time to concentrate on high intellectual property items and not
mundane execution tactics.
Drawback
● Every process re-sequencing and modularization is not possible.
● Longer lead time, high inventory levels, skewed inventory.
● Too many localization options.
● Unpredictable, negatively correlated demand
b. A new technology allows books to be printed in 10 minutes. Fahasa has decided to
purchase these machines for each store. It must decide which books to carry in stock

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Student Name: Vũ Hoàng Lam
Student ID: IELSIU19036

and which books to print on demand using this technology. Do you recommend it for
best sellers or for other books? Why?
Fahasa should keep best-seller books in stock since they attract customers and can be
sold quickly, and use this technology to print other books so that Fahasa can save an
amount of inventory by not stocking low-demanded books.
Question 3:
Apple manufactures 20 laptops with four distinct components: processor, memory, hard drive
and motherboard. Under the disaggregate option, Apple designs specific components for each
laptop, resulting in 20x4=80 distinct components. Under the common-component option,
Apple designs laptops such that two distinct processors, two distinct memory units, two
distinct hard drives and two distinct motherboards can be combined to create 20 laptops.
Monthly demand for each of the 20 laptops is independent and normally distributed, with a
mean of 10,000 and a standard deviation of 2,000. The replenishment lead time for each
component is one month. Apple is targeting a CSL of 95 percent for component inventory.
a. Evaluate the safety inventory requirements with and without the use of component
commonality.
The total required safety inventory for not using component commonality:
−1
𝑠𝑠 = 80 × 𝐹𝑠 (𝐶𝑆𝐿) × 𝐿 × σ𝐷 = 80 × 𝑁𝑂𝑅𝑀𝑆𝐼𝑁𝑉(0. 95) × 1 × 2, 000 = 263, 200 𝑢𝑛𝑖𝑡𝑠

Safety stock per common component:

−1
𝑠𝑠𝑐 = 𝐹𝑠 (𝐶𝑆𝐿) × 𝐿 × 8 × σ𝐷 = 𝑁𝑂𝑅𝑀𝑆𝐼𝑁𝑉(0. 95) × 8 × 2, 000 = 9, 306 𝑢𝑛𝑖𝑡𝑠

Total required safety stock:

𝑠𝑠 = 8 × 𝑠𝑠𝑐 = 8 × 9, 306 = 74, 448 𝑢𝑛𝑖𝑡𝑠
b. Calculate the percentage of safety inventory that was reduced by using component
commonality.
263,200 − 74,448
%𝑅𝑒𝑑𝑢𝑐𝑡𝑖𝑜𝑛 = 263,200
= 71. 71%

(Requirement: Show step-by-step manual calculation for this problem)

Question 4:
a. Give an example of modular and nonmodular products and processes.
b. How do standardization strategies help managers deal with demand variability and the
difficulty of making accurate forecasts?
Standardization in firms helps to manage supply chain effectively as the information
of aggregate forecasts can be used to deal with demand variability.
c. What are the advantages and disadvantages of integrating suppliers into the product
development process?
Advantages of integrating suppliers:
Decline in: Purchased material costs, Development time and cost, Final
manufacturing cost

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Student Name: Vũ Hoàng Lam
Student ID: IELSIU19036

Increase in: Purchased material quality

Disadvantages:
The commitment of resources and time from all parties
Tight integration with a handful of carefully suppliers
Integration limits flexibility and carries a high risk in case of a failed relationship.