Current Weight

SKU Category KM Description Item Source (lbs)

2300105 23 BATERIA KY357 Batteries KEY 0.10
1609313 16 T.V. 25" SANYO TV Local 8.82
2780211 27 CONECTOR F-59 Cable/Connector KEY 0.01
1709786 17 TEL CEL SONY Z200 Cellphone KEY 0.60
6300612 63 PURIFICADOR DE AIRE Air Purifier KEY 8.08
1309034 13 KARAOKE JXOK5 Karaoke Machine Local 16.50
6509036 65 CALC.CIENT.SC OL153 Calculator Local 1.23
6109015 61 REGULADOR KOBLENZ BP1000 Surge Protector Local 0.96
4309113 43 TELEFONO ALAMBRICO GONDOL Telephone Local 1.50
2000234 20 RADIO FM YB400PE Radio KEY 3.00
 Local US Asia Service
Volume Units/ Sales Base Unit Base Unit Base Unit Level
(Cubic ft) Pallet Price ($) Cost ($) 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% 0.90
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
3.50 4 138.89 108.33 75.00 73.61 50% 0.95
0.20 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

1 month

General Lead Times/Replenishment (Days)

Annual Holdin 25.00% Asia
Asia (Std. D
Ocean Freight OKC
$/Cubic ft $2.05 OKC (Std. D
Local
US Shipping
$/lb (OKC to $0.05 Mexico Shipping
$/lb (Border
$/lb (Manzan
 Calculation of EOQ Calculation of Total Annual Cost
Projected 2012 Local US Asia Local

Mean Std Dev of

Demand Demand mean_LT
(Month) (Month) EOQ C_i EOQ C_i EOQ Q D
1,800 250 245.93 0.64 1,147.49 0.54 2,013.96 246.00 180.00
115 95 4.89 153.19 18.71 154.86 509.05 5.00 11.50
675 85 165.80 0.56 750.32 0.52 1,233.29 166.00 67.50
152 69 5.65 146.15 22.03 144.36 585.24 6.00 15.20
125 45 5.37 108.60 23.17 109.20 530.73 6.00 12.50
30 16 2.73 114.95 11.03 119.59 260.00 3.00 3.00
108 65 16.69 10.89 68.03 10.95 493.32 17.00 10.80
540 270 33.00 9.78 160.52 9.58 1,103.09 33.00 54.00
910 334 59.84 5.84 269.73 5.86 1,431.97 60.00 91.00
38 17 2.63 144.96 11.06 143.00 292.62 3.00 3.80

30 days

Times/Replenishment (Days)
Months Order Costs (per SKU)
65 2.167 Asia $12.60
7 0.233 US $4.86
14 0.467 Local $0.28
1.3 0.043
3 0.100 Labeling
Cost per unit (Asia) $0.02
Mexico Shipping Cost per unit (OKC) $0.14
$0.09
$0.12 NOM license fee
$1,000 per SKU per annum
on of Total Annual Cost PER SKU

stdev_LT
D z SS RoP TC_i TC_o TC_h TAC
79.06 2.05 162.36 342.36 17,280.00 24.59 57.07 17,361.66
30.04 2.05 61.70 73.20 178,254.60 77.28 2,073.11 180,404.99
26.88 1.28 34.45 101.95 5,346.00 13.66 19.38 5,379.04
21.82 2.05 44.81 60.01 233,472.00 85.12 1,529.99 235,087.11
14.23 1.64 23.41 35.91 175,005.00 70.00 770.22 175,845.22
5.06 1.64 8.32 11.32 38,998.80 33.60 266.01 39,298.41
20.55 1.64 33.81 44.61 13,504.32 21.35 110.22 13,635.88
85.38 1.64 140.44 194.44 86,378.40 54.98 523.00 86,956.38
105.62 2.05 216.92 307.92 74,583.60 50.96 421.61 75,056.17
5.38 1.64 8.84 12.64 67,592.88 42.56 383.27 68,018.71
US Supplier (Periodic review (T,S) policy)

TpLTD_m TpLTD_si
T (months) d_bar sigma_d LT_bar sigma_LT ean gma SS S
0.467 1,800.00 250.00 0.467 0.04 1,680.00 253.81 521.25 2,202
0.467 115.00 95.00 0.467 0.04 107.33 91.91 188.77 297
0.467 675.00 85.00 0.467 0.04 630.00 87.17 111.71 742
0.467 152.00 69.00 0.467 0.04 141.87 66.98 137.57 280
0.467 125.00 45.00 0.467 0.04 116.67 43.81 72.06 189
0.467 30.00 16.00 0.467 0.04 28.00 15.51 25.52 54
0.467 108.00 65.00 0.467 0.04 100.80 62.97 103.58 205
0.467 540.00 270.00 0.467 0.04 504.00 261.89 430.77 935
0.467 910.00 334.00 0.467 0.04 849.33 325.08 667.62 1,517
0.467 38.00 17.00 0.467 0.04 35.47 16.51 27.15 63
 Asia

T,S AC_I AC_o AC_h NOM TAC_US C_i EOQ

0.467, 2202 13,776.48 124.97 150.08 1,000.00 15,051.53 0.54 2,013.96
0.467, 297 211,400.54 124.97 8,256.93 1,000.00 220,782.45 154.86 509.05
0.467, 742 4,531.14 124.97 37.65 1,000.00 5,693.76 0.52 1,233.29
0.467, 280 266,569.39 124.97 6,322.14 1,000.00 274,016.51 144.36 585.24
0.467, 189 162,901.05 124.97 2,748.36 1,000.00 166,774.38 109.20 530.73
0.467, 54 41,382.00 124.97 934.40 1,000.00 43,441.37 119.59 260.00
0.467, 205 14,109.81 124.97 350.50 1,000.00 15,585.29 10.95 493.32
0.467, 935 63,359.50 124.97 1,360.99 1,000.00 65,845.46 9.58 1,103.09
0.467, 1517 63,726.94 124.97 1,283.81 1,000.00 66,135.72 5.86 1,431.97
0.467, 63 66,099.94 124.97 1,305.20 1,000.00 68,530.11 143.00 292.62
 T
(mont sigma_L TpLTD_m TpLTD_si
T (weeks) hs) d_bar sigma_d LT_bar T ean gma SS
4.00 0.93 1,800.00 250.00 2.17 0.23 5,580.00 608.40 1,249.50
4.00 0.93 115.00 95.00 2.17 0.23 356.50 169.40 347.91
4.00 0.93 675.00 85.00 2.17 0.23 2,092.50 217.26 278.44
4.00 0.93 152.00 69.00 2.17 0.23 471.20 126.56 259.92
4.00 0.93 125.00 45.00 2.17 0.23 387.50 84.43 138.87
4.00 0.93 30.00 16.00 2.17 0.23 93.00 29.03 47.75
4.00 0.93 108.00 65.00 2.17 0.23 334.80 117.19 192.75
4.00 0.93 540.00 270.00 2.17 0.23 1,674.00 491.80 808.94
4.00 0.93 910.00 334.00 2.17 0.23 2,821.00 625.23 1,284.06
4.00 0.93 38.00 17.00 2.17 0.23 117.80 31.22 51.35
 Calculation of Total A

Number
S T,S AC_I AC_o AC_h NOM TAC_Asia of SKUs
6,830.00 0.933, 6830 11,594.88 162.00 280.41 1,000.00 13,037.29 50.00
705.00 0.933, 705 213,700.45 162.00 15,546.66 1,000.00 230,409.11 10.00
2,371.00 0.933, 2371 4,182.44 162.00 76.61 1,000.00 5,421.04 53.00
732.00 0.933, 732 263,318.11 162.00 11,940.70 1,000.00 276,420.81 20.00
527.00 0.933, 527 163,797.15 162.00 5,383.63 1,000.00 170,342.78 15.00
141.00 0.933, 141 43,052.40 162.00 1,846.05 1,000.00 46,060.45 15.00
528.00 0.933, 528 14,194.57 162.00 665.79 1,000.00 16,022.36 15.00
2,483.00 0.933, 2483 62,055.72 162.00 2,540.02 1,000.00 65,757.74 100.00
4,106.00 0.933, 4106 64,014.13 162.00 2,504.18 1,000.00 67,680.31 12.00
170.00 0.933, 170 65,209.82 162.00 2,469.72 1,000.00 68,841.54 10.00
Calculation of Total Annual Cost for ALL SKUs

Minimum cost (for Source Current

Local US Asia chosen source) Chosen source
868,082.899 752,576.712 651,864.544 651,864.54 Asia KEY
1,804,049.93 2,207,824 2,304,091 1,804,049.93 Local Local
285,089.20 301,769 287,315 285,089.20 Local KEY
4,701,742.22 5,480,330 5,528,416 4,701,742.22 Local KEY
2,637,678.25 2,501,616 2,555,142 2,501,615.75 US KEY
589,476.22 651,621 690,907 589,476.22 Local Local
204,538.24 233,779 240,335 204,538.24 Local Local
8,695,638.46 6,584,546 6,575,774 6,575,773.57 Asia Local
900,674.05 793,629 812,164 793,628.64 US Local
680,187.08 685,301 688,415 680,187.08 Local KEY

Total annual cost for the company 18,787,965

KEY 752576.712404604
Local 1804049.93296502
KEY 301769.340452325
KEY 5480330.12261031
KEY 2501615.75447408
Local 589476.216741514
Local 204538.23762195
Local 8695638.45838825
Local 900674.051616879
KEY 685301.07980872
 Original Abg Pallets
sourcing cost Savings inventory needed
752,576.71 100,712.17 2,089.50 2.09
1,804,049.93 - 64.20 8.02
301,769.34 16,680.14 117.45 0.34
5,480,330.12 778,587.90 47.81 0.37
2,501,615.75 - 101.23 12.65
589,476.22 - 9.82 2.46
204,538.24 - 243.15 3.04
8,695,638.46 2,119,864.89 156.94 0.78
900,674.05 107,045.42 246.92 2.15
685,301.08 5,114.00 10.34 0.10

Total saving 3,128,004.52 587.47

 0.0007 0.631579
0.001200 0.00190
0.63
 Warehouse Parameters
Description Value
Capacity in pallets 1,850
Square feet 40,000
Rent ($/Sq ft per year) $3.75
Salary per:
Manager (1 in total) $30,000
Supervisor (4 in total) $12,000
Benefits (% applied to salary) 30%

Fixed cost
Rent 150000
Salary 78000

Variable cost pg 6 of case from graph

capacity ytilisation 0.3175539906
we know from pg 6 vc for different cpacity utilisdation
but not exactly b18 utilisation is given so either take closest or adopt a regression
for 15k square feet 812.162
gfor 40k sq feet 2165.7653333
saving 15% 1840.9005333

VC / week 1840.9005333
vc totakl 94674.884571

total cost 322674.88457

 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
1000 ≤ x < 1200 $2.75
1200 ≤ x < 1400 $1.50
1400 ≤ x $0.75
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
SKU Category1 Description Number of SKUs
13 Music 15
16 TV, DVD 10
17 Cell phones 20
20 Antennas, Short-wave radios 10
23 Batteries 50
27 Fuses, adapters 53
43 Telephones 12
61 Surge protectors 100
63 Gadgets 15
65 Calculators 15
Total 300
1
SKU Category = First two digits of SKU number
 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

Units/ Sales Base Unit Base Unit Base Unit Level Demand
Pallet Price ($) Cost ($) Cost ($) Cost ($) Duty (Type 1) (Month)
1,000 1.33 0.80 0.41 0.40 18% 0.98 1,800
8 176.94 129.17 116.78 115.01 30% 0.98 115
350 1.18 0.66 0.38 0.37 10% 0.90 675
128 142.22 128.00 108.09 106.67 35% 0.98 152
8 166.67 116.67 93.33 91.67 15% 0.95 125
4 138.89 108.33 75.00 73.61 50% 0.95 30
80 16.28 10.42 8.46 8.30 25% 0.95 108
200 20.51 13.33 8.41 8.21 13% 0.95 540
115 9.49 6.83 4.46 4.37 23% 0.98 910
100 174.39 148.23 120.33 118.58 20% 0.95 38

1 month 30 days

General Lead Times/Replenishment (Days)

Annual Holdin 25.00% Asia 65
Asia (Std. D 7
Ocean Freight OKC 14
$/Cubic ft $2.05 OKC (Std. D 1.3
Local 3
US Shipping
$/lb (OKC to $0.05 Mexico Shipping
$/lb (Border $0.09
$/lb (Manzan $0.12
Projected 2012 Local US US Asia Local

Std Dev of
Demand mean_LT stdev_LT
(Month) EOQ C_i EOQ C_i EOQ Q D D
250 245.9 0.6378 $1,147.49 $0.54 2013.96 246 180 79.06
95
85
69
45
16
65
270
334
17

Order Costs (per SKU)

2.167 Asia $12.60
0.233 US $4.86
0.467 Local $0.28
0.043
0.100 Labeling
Cost per unit (Asia) $0.02
Cost per unit (OKC) $0.14

NOM license fee

$1,000 per SKU per annum
 Local US Supplier (Periodic review (T,S)

z SS RoP TC_i TC_o TC_h TAC T (months) d_bar

2.0537 162.36 342.36 17280 24.58537 57.07262 Err:522 0.4666667 1,800

T
S
qrt per ord
SS

avg qty on

Q 246
RoP 342 mean 180 1 Local Continuous Q, R
SS 162 2 US Periodic Re T, S
3 Asia Periodic Re T, S
er (Periodic review (T,S) policy)

TpLTD_m TpLTD_si
sigma_d LT_bar sigma_LT ean gma SS S T,S AC_I
250 0.467 0.043 1680 253.8057 521.2532 2201.253 0.466, 220 13776.48

0.466667
2201
840
521

941

TAC

T=2weeks
T=4weeks
 Asia

T
(mont
AC_o AC_h NOM TAC_US C_i EOQ T (weeks) hs) d_bar
$124.97 150.0828 1000 15051.53 $0.54 2013.96 4 0.933333 1,800
 sigma_L TpLTD_m TpLTD_si
sigma_d LT_bar T ean gma SS S T,S AC_I
250 2.167 0.233 5580 608.3995 1249.5 6829.5 0.93, 6830 $11,594.88

T 0.933333
S 6830
qrt per ord 1680
SS 1250

avg qty on 2090

AC_o AC_h NOM TAC_Asia
$162.00 $280.41 1000 $13,037.29

AC_I AC_o AC_h NOM TAC_Asia

Local 17280 25 57 0 17362
US 13776 125 150 1000 15052
Asia 11595 162 280 1000 13037
 demand LT
1 constant constant
2 constant variable
3 variable constant
4 variable variable
Q 246
RoP 342 mean 180
SS 162
 Continuous Review system:
demand

lead time

lead time demand

Reorder Point

Periodic Review system:

demand

planning window

demand during planning window

S
 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)
shment (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
pping Cost per unit (OKC) $0.14
$0.09
$0.12