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# Inventory Management

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A. Given the data of past demand for surgical and exam gloves, how did you decide on the forecast for each to use in the inventory management planning? How did you take into account that surgical gloves can be substituted for exam gloves but exam gloves cannot be substituted for surgical gloves? How did you take into account the effect of unusual events like the visiting cardiologist and the tornado in a nearby town on demand for each type of glove?

b. How do you balance the Six Sigma objectives of virtually never suffering a stock out on gloves versus the costs to maintain sufficient inventory to guarantee that medical personnel nearly always have the right glove at hand?

c. What is the existing capacity of the organization?

#### Solution Preview

Please see attachment for help regarding your questions. Fundamental issues are raised and ways to deal with them are given. Formulas to derive EOQ when partial substitution exists are also given.

a. Given the data of past demand for surgical and exam gloves, how did you decide on the forecast for each to use in the inventory management planning?
- The demand for both gloves is increasing by 7.5-10% per year. The annual demand (historical) is given. Using this annual demand and growth rate annual demand for year 2004 of both gloves can be forecasted. In year 2004 demand for Jan-Jun is given. From the forecasted annual demand for year 2004, the actual demand for Jan-Jun can be consumed thereby giving bi-monthly forecast for remaining period. Alternatively, bi-monthly demand for 9 periods is given. Assuming same growth rate forecast for Jul-Aug 2004 can be obtained.
Once bi-monthly forecast is available per week demand can be computed by dividing bi-monthly demand by number of weeks (8 weeks). Further, daily demand is weekly demand divided by number of working days in a ...

#### Solution Summary

Word file contains fundamental issues raised and ways to deal with them. Formulas to derive EOQ when partial substitution exists are also given.

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