Accоrding tо SCM 300, prоducts thаt аre on the shelf in the store reаdy to be sold to customers is called what kind of inventory?
We wоrked а mоre cоmplex version of this one weekend 4. Here is а simplified version. Hornby Product Compаny: The Hornby Products Company, headquartered in Denver, Colorado, markets a broad line of hand crafted furnishings. Hornsby has established markets throughout most of the area west of the Mississippi. Its products are distributed to these markets mainly through a series of specialized manufacturer's representatives. The Company has been so successful in western markets that management had decided to expand its market area to the east. The company is currently serving this new region from its warehouse in Denver and a regional warehouse in St Paul. Sales in the eastern region have grown to such a level that management has decided to establish a system of distribution warehouses to serve this market. The company is now asking, how many additional warehouses are needed, and where should they be located? The Problem: Hornsby products has contracted with 18 different manufacturers representatives east of the Mississippi. The representatives have been placing larger orders, necessitating more and more shipments from Denver in order not to drastically deplete the stock at Saint Paul's. This has made it difficult to adhere to the 24-hour delivery policy that the company wishes to maintain. The situation has worsened to the point where management has concluded that the sales growth will be stifled unless distribution warehouses are set up to serve the eastern region. The final impetus to establish these warehouses was provided by the representative in Indianapolis, who complained that late delivery of samples had caused the loss of a sizable contract for the furnishing of a major hotel chain. Solution: As a first step in establishing the system, company officers visited each of the 18 cities in which they had manufacturing representatives (Table 2). Eight of these cities (Table 1) were judged to have sufficient transportation services and warehouse facilities for distribution. Preliminary work was done on estimating the cost and determining the availability of specific facilities. Since the company policy was to lease distribution warehouses, little difficulty was encountered in finding at least some warehouse space in each of the 8 possible cities. The typical warehouse facility offers a leasing arrangement that follows a cost structure consisting of a fixed cost ( F ) plus a variable cost ( V ). There is a volume ceiling dictated by material handling equipment: no more than this amount of product can be moved through the warehouse. The fixed cost, variable cost per hundredweight (cwt) and volume ceiling for each warehouse is listed in Table 1 below. The term hundredweight refers to 100 lbs of product. For the purpose of evaluating expansion alternatives, the sales levels have been forecast 2 years into the future. Detailed sales forecast for each representative have been converted to hundredweights (cwt) sold annually at each location. At Hornby products company, the use of hundredweight as a unit of measure turns out to be a relatively accurate means of aggregate demand, and it is convenient in working out transportation cost. The sales forecast are given in Table 2 as volume (cwt). The cost of transportation from each possible warehouse to each representative has also been determined. The transportation cost is paid to a third party carrier and are in addition to the variable cost of the warehousing. Table 2 presents to warehouse to representative transportation cost ($s per hundred weight). Table 1. Warehouse cost structure. W/H 1 2 3 4 5 6 7 8 Location Atlanta Buffalo Chicago Cincinnati Detroit Pittsburgh Richmond St. Louis Fixed Cost 2700 2900 3500 2200 3300 3000 2000 1800 Var. Cost 6 8 9 7 8 8 6 5 Max Cap 1000 800 1050 1500 1250 1250 1000 900 Table 2. Rep Number Atlanta Buffalo Chicago Cincinnati Detroit Pittsburgh Richmond St. Louis Volume 1 1 13 16 11 15 11 8 12 275 2 4 15 15 12 16 13 11 10 160 3 13 1 10 8 4 4 7 13 240 4 7 6 11 6 8 6 4 10 260 5 4 10 15 10 13 8 4 14 135 6 2 11 14 9 13 9 7 11 160 7 16 10 1 9 6 9 14 7 400 8 9 6 7 3 6 6 7 7 200 9 13 3 7 6 3 5 8 10 320 10 10 4 8 4 5 4 7 9 220 11 15 4 6 8 1 7 11 11 190 12 9 10 7 6 9 8 10 4 100 13 14 8 2 7 4 9 12 6 140 14 12 9 4 6 7 8 11 4 310 15 4 9 12 7 11 9 6 9 125 16 8 8 8 4 8 8 8 6 340 17 8 14 12 10 14 12 12 6 240 18 6 12 11 8 12 10 9 7 210