To survive inside the fierce competition of the sector, ALKO will need to have an efficient and cost-saving inventory system. The objective of this record is to assess the distribution network of ALKO INCORPORATION in order to minimize its total annual cost that controlled by a customer support level of 95%.

Current System

First of all, a few look at the conditions of current ALKO's syndication system. Have annual expense of 1 substantial product by DC1 under current system as example: Averageinventory=Q/2+SS=T*D/2+Z*ПѓD*в€љT+L=6*35. 48/2+1. 645(CSL=95%)*6. 98*в€љ6+5=212. 88/2+38. 08=144. 52units, Order up to level=DT+L+SS= (6+5)*35. 48+38. 08=390. 28+38. 08=428. 4units, Total units transported annually=Q*(365/6)=212. 88*(365/6)=212. 88units/order*60. 83orders=12950. 2units. And we acquired the: Possessing cost of products on hand in storage= \$0. 15/unit/day*144. 52units*365days=\$7, 912. 5, Having cost of products on hand in transit=\$0. 15/unit*12950. 2units=\$1, 942. 5, Transportation expense from herb to DC1=\$0. 09/unit/day*35. 48units*365days=\$1, 165. five, Transportation expense from POWER to customer=\$0. 1/unit/day*35. 48units*365days=\$1, 295. Consequently , in current system: Total annual Cost of one particular high merchandise at Distribution Centre1 =7912. 5+1942. 5+\$1165. 5+\$1295=\$12, 315. 5. Then simply 10 excessive products of DC1 will probably be \$123, 155. After establishing all the other costs in this approach, the total twelve-monthly cost of inventory and division in current system is \$1, 063, 918. Setting up NDC instead of five DCs

What will be the problem if we close 5 local DCs and create a nationwide distribution center outside Chicago, il instead? Will certainly this transform reduce ALKO's annual cost of inventory and distribution? Following aggregation, typical daily demand of high, method and low products of National Distribution Centre will probably be 90. 92, 26. 43 and 6th. 49 models separately. Have annual cost of 1 large product in NDC when ever correlation coefficientПЃ is 0 as model: Average inventory=Q/2+SS=T*D/2+Z*ПѓD*в€љT+L=6*90. 92/2+1. 645(when CSL=95%: Z*=1. 645)*12. 27(when...