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    Section A Group 6

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    aniket verma
    Startech is a manufacturer and distributor of technology products that saw 70 million USD in sales growth over the past 4 years. Paul Seed, the owner, wants to improve the supply chain to handle increasing complexities. The document recommends maintaining decentralized inventory at 5 warehouses to minimize total costs. Safety inventory levels were calculated for each warehouse. Centralizing inventory was considered but found more expensive due to increased transportation and response times. The recommendation is to keep the decentralized model since total costs are lower than a centralized one based on the assumptions provided.

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    Section A Group 6

    Uploaded by

    aniket verma
    55 views10 pages
    Startech is a manufacturer and distributor of technology products that saw 70 million USD in sales growth over the past 4 years. Paul Seed, the owner, wants to improve the supply chain to handle increasing complexities. The document recommends maintaining decentralized inventory at 5 warehouses to minimize total costs. Safety inventory levels were calculated for each warehouse. Centralizing inventory was considered but found more expensive due to increased transportation and response times. The recommendation is to keep the decentralized model since total costs are lower than a centralized one based on the assumptions provided.

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    Section_A_Group_6_StarTech.com.pptx

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    Startech is a manufacturer and distributor of technology products that saw 70 million USD in sales growth over the past 4 years. Paul Seed, the owner, wants to improve the supply chain to handle increasing complexities. The document recommends maintaining decentralized inventory at 5 warehouses to minimize total costs. Safety inventory levels were calculated for each warehouse. Centralizing inventory was considered but found more expensive due to increased transportation and response times. The recommendation is to keep the decentralized model since total costs are lower than a centralized one based on the assumptions provided.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    55 views10 pages

    Section A Group 6

    Uploaded by

    aniket verma
    Startech is a manufacturer and distributor of technology products that saw 70 million USD in sales growth over the past 4 years. Paul Seed, the owner, wants to improve the supply chain to handle increasing complexities. The document recommends maintaining decentralized inventory at 5 warehouses to minimize total costs. Safety inventory levels were calculated for each warehouse. Centralizing inventory was considered but found more expensive due to increased transportation and response times. The recommendation is to keep the decentralized model since total costs are lower than a centralized one based on the assumptions provided.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 10

    STARTECH.

    COM
    Presented by: Group 6

    Harsh Vardhan M026-20


    Akshunn Kaushik M140-20
    Cyril Prince M151-20
    Himanshi Bairagi M157-20
    Sneha Yadav M187-20
    Yogita Sharma M201-20
    Anubhav Jain M208-20
    Saurabh Jain M248-20
    Sumit Kumar M257-20
    Sweta M260-20
    ROADMAP

    Q1. The optimal Q3. Recommendations


    inventory levels would you make to Paul
    for the 5 seed
    warehouses

    01 02 03 04
    Case Facts Q2. Alternatives and
    probable advantages
    and disadvantages of
    the option
    Case Facts

    01 02 03
    Startech was a Paul Seed wanted to improve Sales revenue grew by 70
    manufacturer and supply chain to accommodate Mn USD in previous 4 Years
    distributor of technology the increasing complexities.
    products

    04 05 06
    Ensuring that key Startech focused on products in Inventory as percentage of
    connectivity products were growth stage and discontinued sales were 35%, Paul had to
    available was key element of products. strategise the working capital
    Startech’s strategy utilization to achieve this.
    Assumptions Made
    ● Selling Price of the product is 25% higher than the Cost Price.
    ● We have assumed the correlation between the demand at individual warehouses to
    be 0.6
    ● It is assumed that in centralized system the overall transportation costs will
    increase by 10%, so it will become 25% (earlier 15%)
    ● Holding cost per SKU = 20% of product price
    ● CSL of Y ranked product is assumed to be 0.9 (90%)
    ● We have assumed that no extra costs will be incurred in building and maintaining
    the single centralized system. (Cost incurred in building it will be equal to the
    Income from selling the 5 SKU)
    Q1. Safety Inventory for 5 warehouses

    ● Lead Time = 1 month ( given in case)


    ● Safety Inventory = NORMSINV(CSL) * SQRT(L) * Stdev(D)

    Warehouse No. Total Safety


    Inventory
    ● 10 2441
    ● 20 665
    ● 30 1806.123
    ● 40 2372.61
    ● 70 1852.34
    Q2: As Jeff Brodie, what
    alternatives would you
    consider? What are the
    probable advantages and
    disadvantages of this option?
    Considered Alternative : Centralization of the safety inventory at one
    location

    Pros
    ● Reduced Operational Costs:Instead of paying more rent, warehouses will no
    longer require the expenditure of additional funds to purchase new
    equipment and technologies.
    ● Reduced Inbound Costs: Because of the capacity to store greater inventory,
    centralized warehousing can also reduce the cost of shipping process

    Cons
    ● There will be an increase in response time to customer: Because either the
    customer has to come to the centralized location to acquire the product or
    the product has to be shipped or transported to large distance thus
    increasing the response time
    ● Rise in the transportation cost
    Decentralization of safety inventory at respective warehouses

    Pros
    ● Lower transportation , storage and facility costs
    ● Higher responsiveness

    Cons
    ● Increase in maintenance and operational costs such as rents and utilities
    due to increase in number of warehouses
    ● Establishment of highly advanced technology systems to connect all the
    warehouses for proper coordination among them
    Q3: Recommendations to Paul Seed
    ● We recommend that they should stick to the disaggregate model
    because total cost of disaggregate model is less than aggregate model.
    (based on the assumptions).

    The total cost for the disaggregate model comes out to be $ 15,291.79 for
    lead time of one month.

    For the aggregate model, we’ve gotten total cost of $ 15,937 for lead time of
    one month.

    ● For correlation = 0.417, we are indifferent between aggregate and


    disaggregate provided all other assumptions hold.

    If correlation coefficient is less than 0.417 then we will prefer aggregate


    model and in case of coefficient is more than 0.417, preference will be
    disaggregate model
    Thank You!

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