Reference no: EM13841843

In order to help draw reasonable boundaries on the case, please prepare your answers primarily on the case contents and the text and other materials. That is not to say that you are limited to only the case and course materials (we are always looking for extra work or slightly different "twists" on the subject matter).

This "case" has three parts. Each part has a number of questions.

** For essay- or narrative-type questions MS Word is preferred. You can include all the narrative answers in one file. Just be sure to separate the three answers so that each is easy to identify.

** If you use a spreadsheet (e.g., Excel) to do some of the computations, then that will be a separate file. If you do the computations manually, then include your worksheets (e.g., no need to type long computations -- a legible scan is ok).

The file extension (e.g., doc/docx versus xls/xlsx) should make the difference obvious.

Please include your name in (a) the file name; and (b) at the top of the first page inside each file. That helps me for grading, etc.

Post your answers to the drop box. There is no need to send an email.

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Adapted for use at Florida Institute of Technology - Virtual Site in MGT5062 Logistics Policy Fall 2015.

Part 1

Silicon Chips, Inc.

Silicon Chips makes specialty computer chips. There are 10 items in the inventory used to produce the chips. The following summarizes the basic information on these items.

Stock #	Annual volume	$ Unit cost
#01036	100	8.50
#01307	1,200	.42
#10286	1,000	90.00
#10500	1,000	12.50
#10752	250	.60
#10867	350	42.86
#11526	500	154.00
#12572	600	14.17
#12760	1,550	17.00
#14075	2,000	.60

 

You are asked to develop an ABC analysis of this inventory. (Hint: keep in mind that we have covered two "ABC's". This one deals with stratifying an inventory. The other ABC dealt with cost, right?)

You ask the manager if there are any company rules for determining the categories (A, B, or C). The answer is "Huh?". So you get a queasy stomach and realize that you are largely on your own.

For each question, show your work and explain the computation.

Each question/answer is worth 10 points with 2 points for the work.

Q1. Using the annual cost as the basic analysis, prepare an ABC analysis.

Q2. How many items are in each category (A, B, and C)?

Q3. What proportion of the annual cost is in each category (A, B, and C)?

Q4. What proportion of the annual volume is in each category (A, B, and C)?

Q5. Briefly explain your rationale for deciding on the cutoff point for each category.

Q6. The price for #10286 increases to $120.00.

Q6a. What happens to the total inventory value?

Q6b. How does this change your analysis, if any?

Q7. What are two other ways that we might have used to stratify the inventory into ABC?

Part 2.

Today is September 30, 2013. It is 10 AM. Tom was working on a project to brief the CEO this afternoon at 3 PM when he suddenly became sick. Your boss recognizes the great job that you did on the ABC analysis, and volunteers your services to help prepare the briefing.

Alas, your great PowerPoint skills are not what are in demand. What is needed is your analytical skill. Luckily, Tom has been keeping some fairly good records that you find in a binder on his desk.

2015 Actual Sales in units
Jan	650
Feb	595
March	634
April	701
May	665
June	652
July	600
Aug	703
Sep	705
Oct
Nov
Dec

Each question is worth 10 points indicated.

Q1. (10 points) Using a simple moving average of the last three months, what is the forecast for October sales in units?

Q2. (5 points) The sales price per unit is $125. What is the forecast for October sales in $ terms?

 

During the briefing you earn accolades for your quality work on short notice (an 'attaboy' or 'attagirl' as appropriate). However, the CEO says that he doesn't feel that all three months should count equally. He thinks that the most recent month should be 60 percent; the previous month would be about 30 percent; and the other month the balance. "Get back to me with a brief memo with the revised sales forecast in units and dollar terms, ok?" Of course, the "ok" is rhetorical.

Answer Q3 and Q4 in a brief memo to the CEO.

Q3. (10 points) What is the revised sales forecast in unit terms?

Q4. (5 points) What is the revised forecast in dollar terms?

Fast-forward to the end of October 2015. The actual sales were 695.

In a short memo to the CEO answer the following:

Q5. (5 points) What was the difference between the October sales forecast and the October actual sales?

Q6. (5 points) Why might there have been a difference? (Hint: stick to the facts. Don't assume too many unusual scenarios. For example, it is highly unlikely that Martians invaded the earth in this time period.)

Q7. (10 points) What is the November sales forecast in units using a four month simple moving average?

Q8. (5 points) What is the November sales forecast in dollar terms using the simple moving average? What major assumption do you need to make this forecast?

Q9. (10 points) What is the November sales forecast in unit terms using a weighted average of the most recent month = 35%; then 30%; then 20%; and fourth month is the balance?

Q10. (5 points) What is the November sales forecast in dollar terms using the weighted average?

Part 3

(20 points each topic - ABC and sales)

In a memo to the CEO (two pages max), as a logistician outline the pro's and con's of managing inventory using an ABC methodology; and also the usefulness of forecasting sales.

Include how these might also help the overall operations of the entire organization.

And be sure to include an overall assessment of each (i.e., ABC and forecast).