Gregory and Hayes suggest four policy changes to reduce the value of the average inventory (page 7 in the case). For each suggested change below, estimate the savings that can be expected if the change is successfully implemented and discuss if the estimated savings can compensate for the increase in inventory of $1.6 million. a. It is estimated that for 10% of all products, Scientific Glass maintains too high of a service level. Assuming this high service level is 99.9% suppose the company enforces a strict 99% service level.

i. Using data from the case and Exhibit 3, complete the table below.

Product Griffin Beaker Erlenmeyer Flask
Service Level 99% 99.90% 99% 99.90%
Z-Value 2.33 3.09 2.33 3.09
Average Weekly Demand
Stdev of Weekly Demand
POU (weeks)
Q
Average Pipeline
Inventory
Begin on hand
SS
Average On-Hand
Average Inventory

Required:
a. Calculate the percentage saved in the average Inventory by lowering the service level from 99.9% to 99% for each product.
b. Estimate the total inventory savings by taking a simple average of savings for the two representative products and applying this average to the 10% of products. Assume that 10% of products account for 10% of the 2010 inventory value of $10 million.
c. Comment if the calculated savings compensate for the estimated $1.5 million increase in inventory.