Group: RA2P1. Pitinun Srirungruang2. Amonrat Zinthai3. Aditya Mahardhika Yustika Putra4. Koganti Rishi Kumar
AgendaAgenda
• Company Background• Analysis• Inventory Strategy• Service Strategy• Investment Strategy
Company BackgroundCompany Background
• MRS MAC’S is Australian Company• Product
– savory pie and pastry
• Head Quarter– In Perth and Western Australia
• Export– New Zealand, Singapore, and Hong Kong
AnalysisAnalysis
• Problem
• Poor Inventory Management• Poor service• Poor Investment Decision
AnalysisAnalysis
• Solution– Issue with Inventory
• Identified Storage and staging area• New technologies• Process
– The current Service Performance and Scope for Improvement
– Investment Approach
Inventory StrategyInventory Strategy
• Forecasting Demand of Meat Pie
• Total Annual Demand Forecast:
3,791 boxes
Period Months Demand Forecast
Each month
1 January - March 279
2 April - May 318
3 June - July 254
4 September - December 389
Inventory StrategyInventory Strategy
• Causes of Seasonal Demand
• Christmas Time• Weather• School Holiday• Same product but Different brand• Increase of Income Rate• New Flavors
Inventory StrategyInventory Strategy
Input variables
D - Annual Demand (box) 3,791
Co - Ordering Cost 4,500
Ch - Carrying cost per unit 96
EOQ (Optimal order quantity) 596.16
Minimal Total Cost 57,231
• EOQ model for Mrs Mac’s Distributor
ComparisonComparisonEOQ and Demand ForecastEOQ and Demand Forecast
• Assumption:– Open Monday – Friday– Holiday 10 days per year– 250 days open per year
• Order cycle time:– No. day open per year/ (D/Qopt)
= 250/(3,791/596)
= 39.3 working days– Approximately 2 months
ComparisonComparisonEOQ and Demand ForecastEOQ and Demand Forecast
MonthDemand Forecast
EOQExcessive & Shotage
2 months Sum
Jan – Feb 558 596 38 38
Mar – Apr 597 596 -1 37
May – Jun 572 596 24 61
Jul – Aug 508 596 88 149
Sept – Oct 778 596 -182 -33
Nov - Dec 778 596 -182 -215
3,791 3,576
Inventory StrategyInventory Strategy
• EOQ model for Beef
Discount Category
Unit Cost
Order Quantity
(Q)
Annual Cost
Carrying Ordering Purchase Total
1 5.00 1,600 1,040 5,200 663,425 669,665
2 4.70 40,000 26,000 5,200 623,620 654,820
3 4.30 80,000 52,000 5,200 570,546 627,746
4 3.80 120,000 78,000 5,200 504,203 587,403
Inventory StrategyInventory Strategy
• EOQ model for Flour
Discount Category
Unit Cost
Order Quantity
(Q)
Annual Cost
Carrying Ordering Purchase Total
1 1.20 46,349 9,270 11,124 181,968 202,362
2 1.10 50,000 10,000 10,312 166,804 187,116
3 0.95 100,00 20,000 5,156 144,058 169,214
Inventory StrategyInventory Strategy
• EOQ model for Butter
Discount Category
Unit Cost
Order Quantity
(Q)
Annual Cost
Carrying Ordering Purchase Total
1 1.50 18,749 10,312 15,468 96,671 122,451
2 1.35 30,000 16,500 9,667 87,003 113,171
3 1.25 60,000 33,000 4,834 80,559 118,392
Service StrategyService Strategy
• Approach for Service Improvement– Current Scenario– Various alternatives available– Main focus area according to Iain– Future considerations
Comparison among different Comparison among different solution pathssolution paths
Factor Current Scenario Case 1 Case 2
Po 0.3113 0.0448 0.0157
W 0.0046 0.0333 0.0334
p 0.1620 0.5833 0.8333
Proposed Strategy
• Proposal based on the results of Queuing analysis
• Multichannel (M/M/m)
• Reasons for using this particular strategy
• Possible advantages and forecasts
Investment StrategyInvestment Strategy
Scenario:• Current capacity: 4000 boxes• Initial investment of $50,000.00 for an additional
of 2000 boxes
Question:
“Whether or not to go ahead with the investment?”
SolutionsSolutions
• Perform an investment analysis using NPV simulations approach
• Performing IRR based on NPV results
Model advantagesModel advantages
• The NPV Excel solution identifies all cash flows through the next 6 years of investment.
• The Excel solution for IRR would help the firm to decide which is the most profitable investment.
• Predict the outcome of a decision in the face of uncertainty.
• To assess the probability of a profit and the probability of a loss.
Simulation ResultSimulation Result
NPV Maximum Profit
NPV Under Random Variable
Annual unit sale price trend
10.5% 8% - 10.5%
Annual Sales demand 9.5% 7.5% -9.5%
NPV $ 15,506.81 $ 3,756.10 - $ 8,624.40
IRR 28% 22% - 25%