Domain: Supply Chain
Question:
"A mid-sized UK distributor currently operates with 60 Days of Inventory on Hand (DOH) and an On-Time In-Full (OTIF) delivery rate of 87%. Management wants to reduce DOH to 45 days over the next 12 months while increasing OTIF to 92%, without raising stockout risk. 
 
 Stage 1: Strategy Selection: 
 From the report's recommendations, choose two supply chain strategies that could simultaneously reduce DOH and improve OTIF. Briefly explain how each address both goals, noting any trade-offs. 
 
 Stage 2: Integrated KPI Impact: 
 For each chosen strategy, describe how it would affect Working Capital, OTIF and Stockout Risk. Link the impacts between metrics (e.g., how improved visibility could lower stockouts and indirectly boost OTIF). 
 
 Stage 3: Financial & Service-Level Calculation: 
 Assume: 
 
 Average Inventory Value = £5 million 
 
 Cost of Capital = 10% 
 
 Forecast Error Reduction from selected strategies improves OTIF by 3 percentage points. 
 
 a) Calculate the annual working capital savings from reducing DOH from 60 to 45 days. 
 b) If each 1% OTIF improvement increases annual revenue by £50,000, estimate the additional revenue from the forecast accuracy gain. 
 c) Combine the two results to show the total annual benefit."

Expected points in a correct answer:
Identify the source report as: "W. W. Grainger, Inc. (2021). Supply chain and inventory management trends 2020-2021: A Grainger report."
For Strategy 2, state that the report highlights that JIT's biggest risk is its reliance on accuracy.
For Strategy 2, state that the report highlights that JIT's biggest risk is its reliance on precision.
For Strategy 1, state that the report notes that legacy systems tend to be the main barrier to moving quickly with IoT adoption.
For Strategy 2, state that the report notes that just-in-time inventory management requires technology that allows inventory to be tracked in real time.
For Strategy 1, state that the report highlights that supply chain digitization is driven by evolving technologies including IoT.
For Strategy 1, state that the report highlights that supply chain digitization is driven by increased access to real-time data.
For Strategy 1, state that the report notes that managers require more precise location-based information for service delivery alerts.
For Strategy 1, state that the report notes that managers require more precise location-based information for real-time inventory tracking.
For Strategy 2, state that the report notes that some companies are shifting to just-in-time inventory management to keep inventory carrying costs off company financials.
For Strategy 2, state that the report highlights that demand must be precisely monitored at all times for JIT to function effectively.
For Strategy 2, state that the report highlights that small demand miscalculations can lead to empty shelves.
For Strategy 2, state that the report highlights that small demand miscalculations can lead to lost sales.
For Strategy 2, state that the report highlights that small demand miscalculations can lead to lower profits.
For Strategy 2, state that increased stockout risk can lead to empty shelves, as highlighted in the Grainger report.
For Strategy 2, state that increased stockout risk can lead to lost sales, as highlighted in the Grainger report.
For Strategy 1, state that real-time inventory tracking can support improved OTIF by enabling faster identification of operational issues.
For Strategy 1, state that reduced excess inventory lowers working capital tied up in stock.
For Strategy 1, state that real-time inventory tracking can support improved OTIF by enabling faster response to operational issues.
For Strategy 2, state that accurate monitoring of demand is required for JIT to support operational efficiency.
For Strategy 2, state that precise monitoring of demand is required for JIT to support operational efficiency.
For Strategy 1, state that improved visibility can help mitigate stockout risk by enabling earlier detection of inventory shortages.
For Strategy 2, state that underestimating demand increases stockout risk, as highlighted in the Grainger report.
For Strategy 2, state that reducing inventory carrying costs lowers working capital requirements.
For Strategy 1, state that the report highlights that increased access to real-time data helps improve workflow processes.
For Strategy 1, state that the report highlights that increased access to real-time data helps improve overall supply chain efficiencies.
For Strategy 1, state that improved access to real-time data can reduce excess inventory.
For Strategy 2, state that minimizing inventory levels reduces inventory carrying costs.
For Strategy 1, state that improved visibility supports reduced excess inventory, as discussed in the Grainger report.
For Strategy 1, state that improved visibility supports improved service performance, as discussed in the Grainger report.
For Strategy 2, state that reliance on accuracy connects inventory reduction benefits with heightened operational risk.
For Strategy 2, state that reliance on precision connects inventory reduction benefits with heightened operational risk.
In the Conclusion, state that the analysis synthesizes digitization using real-time data and IoT, as discussed in the Grainger report.
In the Conclusion, state that the analysis synthesizes just-in-time inventory management, as discussed in the Grainger report.
In the Conclusion, state that digitization is discussed in the report as a driver of improved inventory visibility.
In the Conclusion, state that digitization is discussed in the report as a driver of improved supply chain efficiency.
In the Conclusion, state that JIT inventory management is discussed in the report as a strategy that reduces inventory carrying costs.
In the Conclusion, state that JIT inventory management is discussed in the report as a strategy that increases risk if demand accuracy is not maintained.
Under Assumptions, state that initial Days of Inventory on Hand are 60 days.
Under Assumptions, state that target Days of Inventory on Hand are 45 days.
Under Assumptions, state that average inventory value is £5,000,000.
Under Assumptions, state that cost of capital is 10%.
In subsection (b), calculate additional revenue from a 3 percentage point OTIF improvement as £150,000.
In subsection (a), calculate annual working capital savings as £125,000 using a 10% cost of capital.
In subsection (a), calculate freed inventory as £1,250,000.
In the Conclusion, state that the £275,000 benefit consists of £150,000 in additional revenue.
In subsection (c), calculate total annual benefit as £275,000.
Under Assumptions, state that Days of Inventory on Hand are reduced from 60 days to 45 days.
Under Assumptions, state that forecast error reduction improves OTIF by 3 percentage points.
Under Assumptions, state that each 1% OTIF improvement increases annual revenue by £50,000.
In subsection (a), calculate inventory reduction by reducing DOH from 60 days to 45 days, resulting in a 25% reduction in inventory days.
In the Conclusion, state that, based on prompt-provided assumptions, the combined strategies yield an estimated £275,000 annual benefit.
In the Conclusion, state that the £275,000 benefit consists of £125,000 in working capital savings.