Question

Compare OPT, EQT and EQS (20 pts) a. In what way does a policy of Optimal Allocations make space easier to manage than does a policy of Equal Time Allocations?

b. In what way does a policy of Optimal Allocations make replenishment easier to manage than does a policy of Equal Space Allocations?

c. What fraction of the available volume in the forward pick area should be given to sku under a policy of EQT

d. What fraction of the available volume in the forward pick area should be given to sku under OPT?

Answer 1

Ans:- Optimal allocation talks about taking all the measures to reduce cost with available resrources and hence provide competitive advantage to company. There can be operational and financial constraint which needs to be optimized to minimize the cost.

Equal time allocation talks about giving equal time to every stock keeping unit (SKU) before next replenishment.

Equal space allocation talks about giving equal space to every SKU irrespective of it's demand or size.  

a). Optimal allocation works on the policy to minimize the cost. Hence the SKU's which are in demand are given preference over others and it leads to better management of space. Whereas equal time allocation only leads to creation of unnecessary stock.

b). Optimal allocation prefers SKU's which are in demand and which can be easily be stocked in forward pick area and hence reduce overall cost. But equal space allocation works on the principle of same space for each SKU irrespective of demand or cost.

c). If following sign is used:-

• i ,j, k = to denote SKU A, SKU B, SKU C
• n = Total number of stocks in forward pick location
• Fi = SKU's rate of flow per year

Then allocation of space under EQT is given by fi /(?I fi).

d). The fraction of the available volume in the forward pick area given to sku under OPT = n*?I fi