Maintaining the right Inventory is key issue to efficient supply chain. Excess inventory can increase costs and lower overall efficiency
MBA (management) questions on Inventory Management:
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Q) Prime Plastics Pvt. Ltd. is a company based out of Mumbai, India. They produce vials using LDPE (Low Density Polyethylene) granules. Granules are imported from a plant in Germany which dispatches the goods on the same day when order is received. The shipments are made through sea and the transportation lead time is 45 days. Once the granules are received, the company tests the goods in their inhouse lab and only after that, the granules are used for making vials. Testing time for granules is 15 days. On an average company uses 24 metric tons of granules every month. However the business development team of the company has informed that any day they can receive new orders and the consumption of granules can go up to 30 metric tons.
a.) How much safety stock of granules should the company maintain
b.) At what inventory level the order for new lot of granules should be placed.
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