Your third-party warehouse is bidding for a contract to store widgets as they ar

Question

Your third-party warehouse is bidding for a contract to store widgets as they are manufactured. However, widgets are perishable and should be turned an average of six times per year. The manufacturer produces at an average rate of 41 pallets per day. How many pallet positions should you devote to widgets to ensure that widgets turn as required? Assume 240 working days a year. Assume 50% space utilization. Please fill in a number with one decimal place. Just a number, no explanation, no unit, and no symbol.

Explanation / Answer

Inventory is turned 6 times a year.

Number of days in an year = 240

Number of days in which inventory is turned (Flow time) = 260/6 = 40 days

Average production rate (Flow rate) = 41 pallets per day

Average inventory level = Flow rate*Flow time = 41*40 = 1640

Assuming 50% space utilization, the desired pallet position = 1640/50% = 3280 pallets

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