GFE has been a reliable company in distributing electronics and for many years, the company has earned trust from its customers. However, the recent delivery delays have placed the company in a position that has left the customers dissatisfied to the extend that some of the most trusted customers have defected to other companies. There has been the need for the company to address the prevailing situations in order to avoid losing more customers.
Although the inter-modal method of transport GFE has been using is a cheaper one, the meeting held between the Inventory Management Group and the supplier of GNCD10GB revealed that this method has been slower and has led to the delays that have been witnessed after ordering new stock. As a result, Goldfields has seen the need to consult knowledgeable people who will assist him in solving the problem.
GNCB10GB is the GFE product that has been on high demand recently. A review of sales data conducted by GFE has revealed that the product has been on high demand and an annual demand of 78000 units is required in the market. GFE has set a customer service target of 97.5 % in order to ensure that the customers are satisfied and prevent them from defecting to other companies. The company has grown from distributing 45 SKU on a daily basis to 400.
This has implied that GFE should carry enough units of the products in order to avoid running out of stock. Since GFE has been operating for a total of 260 days annually, this has meant that the total safety stock that it is supposed to carry using the inter-modal transportation method is 78000. This is the annual demand that has been projected for the commodity. Since the inter-modal transport mode is a slower method, this safety stock will ensure that GFE does not run out of stock.
Comparing the new safety stock that GFE should carry with the current safety stock of 2000 units, the implication is that GFE should be prepared to meet the additional transportation cost. This is because instead of ordering the normal figure it has been ordering, the new order will be a large number of units that will ensure the company does not run out of stock. It will be advisable to order such a large number of units because according to the sales review that has been conducted, the product has been increasing its sales remarkably.