The U.S. Airfilter company has hired you as a supply chain consultant. The company makes air filters for residential heating and air-conditioning systems.
These filters are made in a single plant located in Louisville Kentucky in the United States. They are distributed to retailers through wholesale centers
in 100 locations in the United States Canada and Europe. You have collected the following data relating to the value of inventory in the U.S. Airfilter
supply chain:
Quarter 1
Quarter 2
Quarter 3
Quarter 4
(January
(April
(July through
(October through
through March)
through June)
September)
December)
Sales (total quarter):
United States
300
350
405
375
Canada
75
60
75
70
Europe
30
33
20
15
Cost of goods sold (total quarter)
280
295
340
350
Raw materials at the Louisville plant (end-of-quarter)
50
40
55
60
Work-in-process and fi nished goods at the Louisville plant (end-of-quarter)
100
105
120
150
Distribution center inventory (end-of-quarter):
United States
25
27
23
30
Canada
10
11
15
16
Europe
5
4
5
5
All amounts in millions of U.S. dollars.
a. What is the average inventory turnover for the firm?
b. If you were given the assignment to increase inventory turnover what would you focus on? Why?
c. The company reported that it used $500M worth of raw material during the year. On average how many weeks of supply of raw material are on hand at the
factory?
