Determine the optimal number of units to order each time

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Reference no: EM132252440

Inventory and Supply Chain Management: Inventory Written Answers

(question 1 has been answered, I still need the other 2 to be answered)

1. Given that you sell 10 different cell phone cases, how do you determine your A, B and C SKUs?

Revenue = Selling price per unit*Number of units sold annually

Once I have revenue for all 10 cases, I will sum up the revenue to get total revenue

Then, for each case type, I will compute the % contribution in revenue which will be:

% contribution in revenue = Revenue of case/Total Revenue*100

Post this, I will arrange all the 10 cases in descending order of % contribution in revenue

Then, I will add one more column for cumulative % contribution.

The starting 80% contributor to revenue will be 'A'

From 80 to 95% contributor will be 'B'

Rest will be 'C'

2. Your Chinese manufacturer produces in batches of 2,000 cell phone cases. Each time you place an order, there's a $10 processing fee. In addition, Amazon charges a holding fee of $1 per cell phone case. With a focus on minimizing ordering and holding costs, how do you determine the optimal number of units to order each time?

3. Given that new cell phones cases are launched every 2-3 months and customers like to have the latest designs, what additional factors would you consider when deciding which cases you definitely don't want to overstock vs. those that are too important to run out of stock?

Reference no: EM132252440

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