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Supply Chain Managment

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Assignment 2 SCMT 200 OP55: Introduction to Global Supply Chain Management
(Due 11pm SUN MAR 15, 2015)
Required:

1. (8 marks) Assume that you are at the end of May 2015. Suppose among the headlines in
Edmonton Journal at the end of May 2015 are:’ * “Crude oil prices increased by 25% in the month of May 2015” * “Costs are Flying High – Fear of Inflation Looming” * “Another Real Estate Frenzy – It’s HOT in Edmonton and Calgary”

(6) Individual impacts of the three events respectively on inventory management 1) If oil prices rise 25%, the cost of production and manufacturing will go up. The cost of transportation will be rising, so ordering larger quantities of inventory less frequently will decrease transportation costs. The 25% increase will also create more work, which will lead to an increase in spending. This increase in spending will make up for the extra inventory that retail stores are holding. 2) If costs rising and a fear of inflation, spending will go down, manufacturing costs will rise and inventories will be lower for retailers to reduce a possibility for write-offs. Interest rates will also rise therefore reducing overall spending. 3) People are making large purchases in the real estate sector, spending is high so retailers will be stocking up more frequently and have more on hand inventory. Buffer stock will be higher to keep up with demand. a. (2) Collective and combined impact of the three events on inventory management
With all three events happening simultaneously retailers will be holding small buffer stocks, ordering more frequently to reduce on hand inventory. Spending will be high then minimal so ordering frequently to keep up with demand. However when spending slows retailers will be ready with minimal

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