Problem: Managing Inventory
You have been recently hired as a regional product manager at Coca-Cola for Jawa Tengah and DIY area. Your sta just told you that, based on her forecasting, the average daily demand is 1,464 bottles. She said that your current EOQ is 65,509 bottles. When your inventory level reaches 58,858 bottles, then you have to reorder again. To avoid the stock out during lead time period, the company must have a safety stock of 300 bottles. She also suggested that the company should increase the safety stock up to 900 bottles during peak seasons such as end year holiday. This is based on average demand data in the last 3 years. The thing is that your current production capacity is higher than the aforementioned EOQ.
Consequently, your production cost is increasing, and you will always be out of budget. Clouding matters further, pandemic is not over yet. Your director specically wants to avoid excess inventory in the regional ware-house. It is suspected that there are too much non-value-added process and too much time wasted in the inventory. Your director said that your inventory warehouse has longer lead time compared to other warehouses. What is the problem here? What are you going to do to solve the problem?