Supply chain analytics is a building block for operations-heavy company. The supply chain function is responsible for managing the purchase of raw material, inventory, vendor management, negotiations, among other things. Hence, it becomes important to learn about supply chain analytics, and we believe there is no better way to learn from real-life supply chain analytics case study.
Rajesh is a manager of a retail store in Timbaktu. Rajesh has been facing a problem of low service level for the past few weeks. He has been given a target from his boss to improve the service level to 95% or above from current levels of 80%. Since Rajesh’s appraisal rating depends on the service level that he is maintaining, he took this target very seriously and started in-house analysis to identify the problem.
He collected the sales and procurement data for analyses. During his analyses, he wanted to see if something can be improved to increase the service level to 95%. While doing the analyses, he noticed that while their sales forecast are quite in line with their demands, the problem exists with their reorder level. They are not able to order the right quantities from the vendors.
Some of the data points that Rajesh collected are as follows:
Stock is delivered from the vendor to the retail store in 4 weeks after placing the order i.e. lead time is 4 weeks. Demand is normally distributed with a mean of 100 units a week and a standard deviation of 10 units.
Also, Rajesh is also interested in knowing the reorder level if he wants to increase the service level to 98 per cent.
Could you help Rajesh identify the right reorder level?
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