Steve\'s Tires and Lube :A variety of parts and supplies must be kept available
ID: 458968 • Letter: S
Question
Steve's Tires and Lube :A variety of parts and supplies must be kept available due to the regularity of use. This has become a particularly high priority ever since the service chains moved into town. Note that these parts and supplies are not only used to support services but also sold as retail to customers who wish to perform their own repair work. PRODUCTS // PRICE // VOLUME USED IN SHOP PER WEEK (in units)// VOLUME SOLD WEEKLY RETAIL (units) high performance motor oil 6.50// 430 //60 oil filter 15.00// 86 //23 windshield wiper blades 20.00// 8// 18 windshield washer fluid 8.50// 12// 50 antifreeze 10.00 //15// 5 battery 55.00 //9// 2 spark plugs 17.50 //40// 10 car freshener 9.99// n/a //25 rearview mirror OSU football helmet 35.00// n/a //20 OSU license plate frames 12.00// n/a // 20 *Purchase cost from supplier is 50% of sales price ** Standard deviation of demand is 10% of total weekly demand WHAT ARE THE SAFETY STOCK LEVELS FOR THESE SUPPLIES? ARE THESE APPROPRIATE?Explanation / Answer
Saftey Stock Levels:
i) High Performance motor oil
Price= 6.5/unit
Volume used in shop/week = 430 units
Volume sold weekly retail = 60 units
Total weekl demand = 490
Standard Deviation of demand = 10 % of weekly demand
= 490 * 0.1 =49
Assuming lead time = 7 days and service level =100 %
saftey stock = standard deviation * sqt(lead time)
= 49 * 2.65 = 130 units
ii) Oil Filter :
Price= 15/unit
Volume used in shop/week = 86 units
Volume sold weekly retail = 23 units
Total weekl demand = 109
Standard Deviation of demand = 10 % of weekly demand
= 109 * 0.1 =10.9
Assuming lead time = 7 days and service level =100 %
saftey stock = standard deviation * sqt(lead time)
= 11 * 2.65 = 30 units
iii) Windshield wiper blades:
Price= 20/unit
Volume used in shop/week = 8 units
Volume sold weekly retail = 18 units
Total weekl demand = 26
Standard Deviation of demand = 10 % of weekly demand
= 26 * 0.1 =2.6
Assuming lead time = 7 days and service level =100 %
saftey stock = standard deviation * sqt(lead time)
= 2.6 * 2.65 = 7 units
iv) Windshield washer fluid:
Price= 8.5/unit
Volume used in shop/week = 12 units
Volume sold weekly retail = 50 units
Total weekl demand = 62
Standard Deviation of demand = 10 % of weekly demand
= 62 * 0.1 =6.2
Assuming lead time = 7 days and service level =100 %
saftey stock = standard deviation * sqt(lead time)
= 6.2 * 2.65 = 17 units
v) Antifreeze:
Price= 10/unit
Volume used in shop/week = 15 units
Volume sold weekly retail = 5 units
Total weekl demand = 20
Standard Deviation of demand = 10 % of weekly demand
= 20 * 0.1 =2
Assuming lead time = 7 days and service level =100 %
saftey stock = standard deviation * sqt(lead time)
= 2 * 2.65 = 6 units
vi) Battery:
Price= 55/unit
Volume used in shop/week = 9 units
Volume sold weekly retail = 2 units
Total weekl demand = 11
Standard Deviation of demand = 10 % of weekly demand
= 11 * 0.1 =1.1
Assuming lead time = 7 days and service level =100 %
saftey stock = standard deviation * sqt(lead time)
= 1.1 * 2.65 = 3 units
vii) Spark plugs:
Price= 17.5/unit
Volume used in shop/week = 40 units
Volume sold weekly retail = 10 units
Total weekl demand = 50
Standard Deviation of demand = 10 % of weekly demand
= 50 * 0.1 =5
Assuming lead time = 7 days and service level =100 %
saftey stock = standard deviation * sqt(lead time)
= 5 * 2.65 = 14 units
viii) Car Freshner:
Price= 9.9/unit
Volume used in shop/week = N.A.
Volume sold weekly retail = 25 units
Total weekl demand = 25
Standard Deviation of demand = 10 % of weekly demand
= 25 * 0.1 =2.5
Assuming lead time = 7 days and service level =100 %
saftey stock = standard deviation * sqt(lead time)
= 2.5 * 2.65 = 7 units
ix) Rearview mirror:
Price= 35/unit
Volume used in shop/week = N.A.
Volume sold weekly retail = 20 units
Total weekl demand = 20
Standard Deviation of demand = 10 % of weekly demand
= 20 * 0.1 =2
Assuming lead time = 7 days and service level =100 %
saftey stock = standard deviation * sqt(lead time)
= 2 * 2.65 = 6 units
x) OSU license plate :
Price= 12/unit
Volume used in shop/week = N.A.
Volume sold weekly retail = 20 units
Total weekl demand = 20
Standard Deviation of demand = 10 % of weekly demand
= 20 * 0.1 =2
Assuming lead time = 7 days and service level =100 %
saftey stock = standard deviation * sqt(lead time)
= 2 * 2.65 = 6 units
Yes, the stocks are appropriate because while calculating the daily usage of each item ,the quantity in safety stock is greater than required daily usage thus values are acceptable.
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