Case- Western Pharmaceuticals
Questions-
1. What should the case fill rate be for each product given the current uncertainty levels and order quantities and how does the calculated aggregate case fill rate differ from the historically observed level?
2. What are the safety stocks and average inventory levels for each product and in aggregate necessary to achieve 95 percent case fill rate for each product? To what extent do the actual inventory levels deviate from the theoretical inventory levels? What conclusions can you draw from the differences?
3. What is the inventory carrying cost impact for increasing the case fill rate from the current level of 95 percent to 99 percent? Assume an annual inventory carrying cost of 20 percent. Assuming that 5 percent is potentially lost due to stockouts (100 - 95 percent) and that there is a 25 percent margin on the average item (COGS = 75 percent), would you recommend that the service level be increased? Justify your answer.
4. What would be the impact on inventory and service of consolidating all of Atlantic Medical stock into a single facility? Apply both the "square root of N" and item level approaches. The square root of N should be applied to aggregate inventory values for e item level approach uses the individual standard deviations. Discuss the difference between the two approaches. Why?