Prince Electronics, a manufacturer of consumer electronic goods, has five distri

Question

Prince Electronics, a manufacturer of consumer electronic goods, has five distribution centers in different regions of the country. For one of its products, a highspeed modem priced at $370 per unit, the average weekly demand at each distribution center is 75 units. Average shipment size to each distribution center is 350 units, and average lead time for delivery is 2 weeks. Each distribution center carries 2 weeks' supply as safety stock but holds no anticipation inventory. a. On average, how many dollars of pipeline inventory will be in transit to each distribution center? $. b. How much total inventory (cycle, safety, and pipeline) does Prince hold for all five distribution centers? units.

Explanation / Answer

a)

Pipeline inventory = Weekly Demand * Lead time = 75* 2 weeks =150

Value of each DC’s pipeline inventory = 150 * 370 = $55,500

b)

Total inventory = Cycle + Saftey + pipeline

Cycle inventory = Q/2

Given Q= 350 units

Saftey inventory =  pipeline inventory = dL = 75*2

No of distribution centers - 5

Total inventory = 5[(350/2) + (2*75) + (2*75)]

= 5 (175 +150 +150 )

= 5 * 475

= 2375 units

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