Question

Please answer both parts for Upvote

a) The manager of the Atlanta Poppa Joe’s Pizzeria has decided to use a Two Bin policy to manage his inventory of dough. His annual demand for dough is about 1800 lbs, averaging 5 lbs a day that he is open. He reorders dough from his supplier in batches of 120 lbs. and the supplier always delivers the order in 3 days. IF he decided to put 85 lbs in Bin 1 (in his kitchen) and to have a safety stock of 20 lbs , how much should he put in bin 2?

b) How do we reduce the need for safety stock?

Answer 1

Under the two bin policy, total stock is kept in two bins. The second bin keeps the stock required during the lead time, and the first bin contains the Q minus the stock in the second bin.

The stock in second bin = lead time x daily demand

The stock in second bin = 3 x 5

The stock in second bin = 15

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b) To reduce the need for safety stock, it is important to achieve better visibility of stock thoughout the supply chain for all participants. This will allow for clearer and more confident planning of stock requirement at the various stock holding points in the chain and thus reduce the need to hold safety stocks.