Team M

Four Star Industries Case Study

Case Study Anaysis

Four Star Industries Case Study

Case Study Anaysis

Table of Contents

Background

Current Situation * Market * Production * Manufacturing * Order Process * Inventory Management

Issues

* Model Proliferation * Inventory and Demand Mismatch * Poor Order Management

Analysis

* Safety Stock Analysis * Warehouse Rent Analysis * MOQ v/s EOQ * Production /Assembly Line Analysis

Recommendations

Conclusion

Background:

Four Star Industries Private Ltd is the manufacturer and wholesaler of the renowned Four Star Pocketed spring mattresses which was founded by Neo Gim Sin in 1966. Its business is aggressively and exclusively focused on servicing the

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Safety Stock Analysis:

Refer to Figure 1 in Appendix section.

According to the case, FS keeps two weeks’ worth of safety stock for all mattress models. Hence, we assume the lead-time of order is 2 weeks. Let

AVG = the average demand per time unit

STD = the standard deviation of demand per time unit

L = the lead-time of order

D = the average demand during the lead-time

L= the standard of deviation of lead-time demand

The average demand during the lead-time is average demand per time unit multiplied lead-time.

D = L*AVG

The standard deviation of lead-time demand is the standard deviation of demand per time unit multiplied by the square root of the lead-time.

L = L*STD

To get the reasonable level of safety stock, from the standard normal table, we can find value of the constant z that corresponds to 97.5%. This is equal to 1.96. So, Safety Stock=L*1.96

Conclusion:

From Figure 1, we can see that it is obvious that the Safety Stock needed is less than 2-week mean demand. If FS could keep the Safety Stock as calculated in the table above, it will definitely save on inventory holding cost and still meet its demand.

Warehouse rent analysis:

Once safety stock is reduced, needed storage space also reduces, therefore reducing cost of renting storage capacity (warehouse). From our online research, we found that the average rent per square feet per month