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11-* Factors Affecting Fill Rate Safety inventory: Fill rate increases if safety inventory is increased. This also increases the cycle service level. Lot size: Fill rate increases on increasing the lot size even though cycle service level does not change. 11-* Example 11.4: EvaluatingSafety Inventory Given CSL D = 2,500/week; ?D = 500 L = 2 weeks; Q = 10,000; CSL = 0.90 DL = 5000, ?L = 707 (from earlier example) ss = FS-1(CSL)?L = [NORMSINV(0.90)](707) = 906 (this value can also be determined from a Normal probability distribution table) ROP = DL + ss = 5000 + 906 = 5906 11-* Evaluating Safety InventoryGiven Desired Fill Rate D = 2500, sD = 500, Q = 10000 If desired fill rate is fr = 0.975, how much safety inventory should be held? ESC = (1 - fr)Q = 250 Solve 11-* Evaluating Safety Inventory Given Fill Rate (try different values of ss) 11-* Impact of Required Product Availability and Uncertainty on Safety Inventory Desired product availability (cycle service level or fill rate) increases, required safety inventory increases Demand uncertainty (sL) increases, required safety inventory increases Managerial levers to reduce safety inventory without reducing product availability reduce supplier lead time, L (better relationships with suppliers) reduce uncertainty in demand, sL (better forecasts, better information collection and use) 11-* Impact of Supply Uncertainty D: Average demand per period ?D: Standard deviation of demand per period L: Average lead time ?sL: Standard deviation of lead time 11-* Impact of Supply Uncertainty D = 2,500/day; ?D = 500 L = 7 days; Q = 10,000; CSL = 0.90; sL = 7 days DL = DL = (2500)(7) = 17500 ss = F-1s(CSL)sL = NORMSINV(0.90) x 17550 = 22,491 11-* Impact of Supply Uncertainty Safety inventory when sL = 0 is 1,695 Safety inventory when sL = 1 is 3,625 Safety inventory when sL = 2 is 6,628 Safety inventory when sL = 3 is 9,760 Safety inventory when sL = 4 is 12,927 Safety inventory when sL = 5 is 16,109 Safety inventory w
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