Quantitative Analysis

Unit 7 Assignment: Mega Save Inventory Levels

Mega-Save is a large retail grocery chain in Rhode Island.  It stocks some of its retail stores from a regional distribution warehouse in a Providence suburb, handling a variety of dry, refrigerated, and frozen food items there.  These items are ordered and received from vendors, then shipped out to retail stores that place their own orders directly with the distribution warehouse.  Both the retail stores and the warehouse run 24/7/360.

One high-volume item is pre-packaged boneless skinless chicken breast.  During 2016 in the United States per capita consumption of chicken was over 90 pounds according to the National Chicken Council.  The Council further says Americans devour 1.25 billion chicken wings during the Super Bowl alone. Thus, chicken is a critical item for Mega-Save and every other grocery retailer, making availability for the shopper extremely important.  A large safety stock of frozen chicken breast is kept at the Mega-Save warehouse.  However, management is concerned that the safety stock held may be too large, and need assistance setting a proper level.

Mega-Save receives this product frozen from a vendor and typically holds it a short time at the warehouse before shipping it on to retail locations.  There the individual packages are thawed in display cases for customer purchases.  To better understand the safety stock problem the manager of the Providence warehouse has pulled the attached data on recent weekly orders for chicken breast and the order lead times of the vendor.

Historical Demand (pounds)        383,577        355,592        440,888        579,286  445,042       399,276        436,796        450,752        471,787        393,401        418,193        438,394        393,829        504,114        436,510        446,084        436,235        365,483        653,094        431,553        469,081        531,049        409,288        440,592        381,845        424,306        448,167        416,391        422,810        525,498        678,805        471,020        432,367        459,687        436,868        395,192        388,689        527,324        435,946        452,301

Historical Lead Times (Days) 5.7 5.3 5.7 7.7 4.6 4.7 4.3 5.6 4.4 5.2 6.2 4.2 7.3 6.5 4.5 4.3 5 5.9 5.1 5.6 7.2 5.2 7.5 7.9 6.2 7.7 3.9 5.5 7.8 6.9 3.8 5.4 19.2 5.5 5.7 3.9 5.6 6.9 6.2 8.2 7.1 6.1 8.4 5.6 4.3 4.9 5.6 4.6 5.8 3.9

Frozen chicken breast is delivered to the Providence facility in 40-pound cases by refrigerated truck.  It is held in a large industrial freezer and ultimately shipped out to retail stores in those same cases.  Ordering costs of $7500 are high owing mostly to the cost of transporting the frozen product as well as time and labor to unload trucks.  Though the amount is difficult to estimate accurately, Mega-Save assigns a $80 annual cost for holding a case of frozen chicken breast at the warehouse for one year.  (Of course, this is a theoretical cost since the time chicken is held typically isn’t this long.)


1. Determine the amount of safety stock that should be held at the warehouse to support a 95% service level to the downstream retail stores.

2. The data shows one very long chicken shipment lead time resulting from very inclement weather.  Mega-Save’s supply chain managers are discussing whether that shipment should be dropped from the data since it represents a very extreme case. If this shipment is dropped from the data what impact would that have on the projected level of safety stock needed?

Price: $10.62

Solution: The downloadable solution consists of 4 pages, 662 words and 2 charts.
Deliverable: Word Document