Inventory Planning

Inventory Planning

	2018	2019	2020		Sales Forecast 2021		Deviation	Cost per unit	150
January	790	853	929		January	1,068	1,014.98	Inventory Holding Cost per unit	22.5
February	800	864	944		February	1,086	997.73
March	1,300	1,404	1,544		March	1,776	307.27	Z-score	0.65
April	1,560	1,685	1,943		April	2,234	151.12	Standard Deviation of Demand	2411.62
May	1,620	1,750	2,469		May	2,839	756.02	Safety Stock	1567
June	1,970	2,128	2,584		June	2,972	888.27
July	2,140	2,311	2,539		July	2,920	836.52	EOQ (Q*)	1,441
August	2,230	2,408	2,541		August	2,922	838.82	Maximum Inventory, (Q* + SS)	3,008
September	1,560	1,685	2,426		September	2,790	706.57	Average Inventory, (Q*/2)	720.72
October	1,280	1,382	1,573		October	1,809	274.38	Number of Orders	17
November	1,070	1,156	1,271		November	1,462	621.50	Re-order Point	2,922
December	940	1,015	976		December	1,122	960.93
Total	17,260	18,641	21,740		Total	25,000	8,354.11	Total Ordering Cost	$16,216
								Inventory Carrying Cost	$16,216
								Safety Stock Carrying Cost	$35,250
								COGS	$150
								Total Cost of Inventory Plan	$67,683

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Surf Shaper, a surf warehouse in California, serves over 300 surf shops and retailers along the California coast. Surf Shaper places their boards in surf shops on consignment and replaces the consignment stock from their warehouse as panels are sold, typically within three days. Inventory must be carefully managed. If the retail surf shops run out of Surf Shaper boards before the consignment inventory is replaced, sales may be lost as customers choose other boards. If its supply chain proves unreliable, Surf Shaper may lose its “shelf space” within the retailer’s shop. For this reason, Surf Shaper strives to maintain a 96% service level with its retailers.

The best-selling board for Surf Shaper is the Grommet, their 8-foot foam wide board suitable for beginning and casual surfers. The Grommet retails for $400, and COGS is $150 per unit. The popularity of the Grommet has been steadily increasing over the past three years. The unit sales report for the past three years is displayed below.

The Grommet is manufactured in Thailand. Orders take 30 days to arrive via sea freight. With the costs of communications, customs, and shipment, each order placed charges $935. Once the boards arrive at the warehouse, the inventory carrying amount of the COGS is 15% per year/unit.

Instructions

Based on the information in this case study, you will create a 2021 inventory plan for Surf Shaper. Use the following spreadsheet, as well as the formulas you learned and practiced last week, to answer the prompts below:

Surf Shaper Case Study

Surf Shaper Case Study – Spreadsheet with 2021 Forecast

1. Create a Sales Forecast showing a 15% increase in sales over 2020.
2. Use the 2021 Sales Forecast to determine how much Safety Stock Surf Shaper should keep on hand to meet their service level goal.
3. Use the EOQ method to identify:
   • The optimal order quantity (Q*)
   • The number of orders to be completed
   • The Re-Order Point
   • Total ordering cost
   • Inventory carrying cost
   • Safety Stock Carrying cost
   • COGS
   • Total cost of the inventory plan