Cosmic Brownies Case Study

When it comes to selling a product, one of the most important aspects to consider is how you manage the inventory. Typically, people do not think about how inventory can drive company costs and how much thought must be put into this topic. Businesses must consider product demand, lead time, holding costs, service levels, among many other variables. All of these factors will result in different methods of holding inventory and will determine how a business orders their materials. We are determining inventory goals for Cosmic Brownies. This product is manufactured in Nashville, Tennessee and our distribution center is located in St. Louis, Missouri which is 6.5 hours away. This provides a short lead time of only one day. We analyzed our forecasted

In addition, we divided our forecasted sales into retail and consumer. Our average demands per month for each quarter for retail sales are 22,082, 24,583, 26,432, and 27,846. For direct to consumer sales, our averages per month for each quarter came out to 1,790, 1,993, 2,143, and 2,258. After determining the average demand per month for each quarter, we used this data to calculate how much safety stock we need to keep per month for each different quarter as well. Safety stock is inventory that is kept to prevent a stock out due to uncertainty. For our product, Cosmic Brownies, we came to the conclusion that a service level of 95% would be sufficient for our retail customers, while a 90% service level was appropriate for direct to consumer. Since our retail sales make up about 92.5% of our total sales, we determined that it was important to have a higher service level for this portion of our

For our product service level will not be a problem because we have a 95% service level. With such a high percentage of 95% our customers will have the product they want available and deliverable within their reasonable time frame. Having a reliable service level is crucial for high quality customer service, because without it customers will not be getting the product they want when they desire our Cosmic Brownies. When customers are not getting what they want when they want it a company’s customer service level will certainly suffer because of this. Our inventory planning is broken up into four quarters. Each Quarter our required inventory continues to rise to meet demand. Our demand steadily rises throughout the course of the year with the final three months having the highest demand. Each quarter we will have to separately order more Brownies between 6-7 times total. We will be reordering