Vantage Analytics distributes B2B SaaS products across India. One SKU family accounts for a disproportionate share of complaints.
Demand averages 1730 units a week with a standard deviation of 709 units. Replenishment lead time is 9 weeks and has itself been slipping. Each unit costs ₹1047 to buy and carries at roughly 21% a year once warehousing, insurance and capital are counted. Gross margin is 37%.
The line currently stocks out about 15% of weeks. Sales say every stockout sends a customer to a competitor. Finance say inventory is already too high.
Advise the operations director. Your answer should provide:
State any assumptions you make.
80 points, 60% to pass.
Reorder point = mean demand over lead time + z x std dev over lead time. Trade the holding cost of safety stock against lost margin on stockouts.