Q1) Analyze the Walmart’s Annual report 2023.

Highlight the supply chain drivers,

inventories, suppliers, and various metrics in your analysis.

Ans 1)

Supply Chain Drivers:

1. Technology Tools and Services: Walmart U.S. and Sam's Club mention their focus on
developing technology tools and services to enhance customer experiences and
operational efficiency. This includes initiatives like pickup and delivery, Walmart+,
and omni-channel shopping experiences. These technologies drive supply chain
efficiency and customer convenience.

2. Distribution Facilities: Walmart U.S. and Walmart International operate numerous

distribution facilities strategically located to facilitate the movement of goods.
Distribution facilities are crucial supply chain drivers, ensuring timely and efficient
product delivery to stores and customers.

3. Logistics and Transportation: The mention of private truck fleets, common carriers,
and various methods of shipping merchandise highlights the logistics and
transportation aspect of the supply chain. Efficient transportation is vital for
maintaining inventory levels and meeting customer demand.

Inventories:
1. Inventory Valuation Methods: The content discusses the inventory valuation
methods used by Walmart segments. Walmart U.S. primarily uses the retail
inventory method (RIM) with LIFO valuation. Walmart International uses RIM or
weighted-average cost, and Sam's Club utilizes the weighted-average cost LIFO
method. These methods determine how inventories are valued and reported in
financial statements.

2. LIFO Adjustment: It is mentioned that Walmart records adjustments for the

projected annual effect of inflation or deflation in LIFO inventory valuation. This
indicates the importance of accurately valuing and managing inventories to reflect
changing market conditions.

Suppliers:
1. Global Supply Chain: Walmart mentions its global supply chain that involves both
U.S. and international suppliers. The company purchases merchandise from
producers near its stores and clubs to streamline the supply chain and offer
competitive prices.
 2. Supplier Standards: Walmart holds suppliers accountable for complying with local
labor laws, worker safety regulations, and other applicable laws. This underscores
the importance of ethical sourcing and supplier relationships in the supply chain.

Various Metrics:
1. Financial Metrics: The content provides financial metrics such as net sales for
different segments (Walmart U.S., Walmart International, Sam's Club) for fiscal years
2021, 2022, and 2023. Financial metrics are crucial for assessing the company's
performance and growth.

2. Membership Metrics: For Sam's Club, membership income is highlighted as a

significant component of operating income. Sam's Club offers different membership
options with various benefits, including free shipping and loyalty rewards currency
(Sam's Cash).

3. Sustainability Metrics: Walmart emphasizes sustainability efforts, such as reducing

emissions, protecting nature, and reducing waste. These metrics reflect the
company's commitment to environmental responsibility and sustainability goals.

4. Community Metrics: The content mentions Walmart's efforts to strengthen

communities through disaster support, associate volunteerism, local grant programs,
and community cohesion initiatives. These metrics reflect the company's community
engagement.

In summary, the content provides insights into Walmart's supply chain drivers, inventory
management practices, supplier relationships, and various financial and non-financial
metrics that are important for assessing the company's operations and performance.

Q2) Target purchases home goods made by a supplier in China. Target’s stores in the United
States sell 200,000 units of home goods each month. Each unit costs $10 and the company
has an annual holding cost of 20 percent. Placing a replenishment order incurs clerical costs
of $500/order. The shipping company charges $5,000 as a fixed cost per shipment along
with a variable cost of $0.10 per unit shipped. What is the optimal order size for Target?
What is the annual holding cost of the optimal policy? How many orders per year does
Target place? What is the annual fixed transportation cost? What is the annual variable
transportation cost? What is the annual clerical cost?

Ans 2)

To find the optimal order size for Target, we can use the Economic Order
Quantity (EOQ) model. The EOQ formula is:
 EOQ= √
2 DS
H

Where:

 D = Annual demand (200,000 units per month * 12 months)

 S = Ordering cost per order ($500 per order)

 H = Holding cost per unit per year (20% of $10 per unit)

Calculation of EOQ:

 D = 200,000 units/month * 12 months = 2,400,000 units/year

 S = $500 per order

 H = 20% of $10 = 0.20 * $10 = $2 per unit per year

Plugging these values into the EOQ formula:

EOQ=√ (2¿¿ 2,400,000∗500)/2¿

EOQ=√ 1,200,000,000

EOQ=34,641.02

So, the optimal order size for Target is approximately 34,641 units.

Calculation of the annual holding cost (H) using the following formula:
H=( EOQ ​/2)∗H

H=(34,641.02/2)∗$ 2

H=$ 34,641.02

The annual holding cost is approximately $34,641.02.

To find the number of orders placed per year, we can use the formula:
Number of Orders per Year = EOQ/D
Number of Orders per Year = 2,400,000/34,641.02

Number of Orders per Year = 69.29

So, Target places approximately 69 orders per year.

Calculation of the annual fixed transportation cost and the annual variable
transportation cost:
  Fixed transportation cost per shipment = $5,000

 Variable transportation cost per unit = $0.10

Annual fixed transportation cost = Number of orders per year * Fixed transportation cost
per shipment

Annual fixed transportation cost = 69 * $5,000

Annual fixed transportation cost = $345,000

Annual variable transportation cost = D * Variable transportation cost per unit

Annual variable transportation cost = 2,400,000 * $0.10

Annual variable transportation cost = $240,000

So, the annual fixed transportation cost is $345,000, and the annual variable transportation
cost is $240,000.

Calculation of the annual clerical cost, which is given by:

Annual Clerical Cost = Number of Orders per Year ∗ OrderingCost

Annual Clerical Cost = 69 * $500

Annual Clerical Cost = $34,500

The annual clerical cost is $34,500.

In summary:

 Optimal order size: Approximately 34,641 units

 Annual holding cost: Approximately $34,641.02

 Number of orders per year: Approximately 69 orders

 Annual fixed transportation cost: $345,000

 Annual variable transportation cost: $240,000

 Annual clerical cost: $34,500

Q3) Amazon sells 20,000 units of consumer electronics from Samsung every month. Each
unit costs $100 and Amazon has a holding cost of 20 percent. The fixed clerical and
transportation cost for each order Amazon places with Samsung is $4,000. What is the
optimal size of the order that Amazon should place with Samsung? With the goal of
reducing inventories, Amazon would like to reduce the size of each order it places with
Samsung to 2,500 units (allowing it to get four replenishment orders every month). How
much should it reduce the fixed cost per order for an order of 2,500 units to be optimal?

Ans 3)

To find the optimal order size for Amazon, we can use the Economic Order
Quantity (EOQ) model. The EOQ formula is as follows:

EOQ=
√2 DS
H

Where:

 D = Annual demand (20,000 units per month * 12 months)

 S = Ordering cost per order ($4,000)

 H = Holding cost per unit per year (20% of $100 per unit)

Calculation of the EOQ:

 D = 20,000 units/month * 12 months = 240,000 units/year

 S = $4,000 per order

 H = 20% of $100 = 0.20 * $100 = $20 per unit per year

Now, plug these values into the EOQ formula:

EOQ=√ (2¿¿ 2,400,000∗4000)/2 0 ¿

EOQ=√ 96,000,000

EOQ=9,798.98

So, the optimal order size for Amazon is approximately 9,799 units.

To find the reduced fixed cost per order (let's call it S_new) that would make
an order size of 2,500 units optimal, we can use the Economic Order Quantity
(EOQ) formula.

EOQ=
√2 DS
H

Rearrange the formula to solve for S_new:

 Snew =(EOQ¿¿ 2∗H )/2 D ¿plug in the values:

 D = Annual demand (240,000 units)

 H = Holding cost per unit per year ($20)

 EOQ = New order size (2,500 units)

2
2500 ∗20
Snew =
2∗2 , 40,000

Snew =260.41

If the current fixed cost per order is $4,000, then the reduced fixed cost per order for an
order of 2,500 units to be optimal would be: S_new =$260

So, to make an order size of 2,500 units optimal, Amazon should reduce the fixed cost per
order to approximately $260

Q4) An automobile company has two contract manufacturers for its electronics components
in Asia. Roxconn assembles its music systems while Tlextronics assembles its control panels.
Monthly demand for music systems is 10,000 units while that for control panels is 4,000.
music systems cost the company $100 while control panels cost $400 and the company has
a holding cost of 25 percent. Currently the company has to place separate orders with
Roxconn and Tlextronics and receives separate shipments. The fixed cost of each shipment
is $10,000. What is the optimal order size and order frequency with each of Roxconn and
Tlextronics? The company is thinking of combining all assembly with the same contract
manufacturer. This will allow for a single shipment of all products from Asia. If the fixed cost
of each shipment remains $10,000, what is the optimal order frequency and order size from
the combined orders? How much reduction in cycle inventory can the company expect as a
result of combining orders and shipments?

Ans 4)

Calculation of the optimal order size and order frequency for each of
Roxconn and Tlextronics separately.

For Roxconn (music systems):

 Monthly demand (D) for music systems: 10,000 units

 Cost per unit (C): $100

 Holding cost per unit per year (H): 25% of $100 = $25

 Fixed cost per shipment (S): $10,000

Using Economic Order Quantity (EOQ) formula:

EOQ=
√2 DS
H

EOQ=√ (2¿¿ 10,000∗10,000)/25 ¿

EOQ=√ 8 , 000 ,00 0

EOQ=2,828.43

The optimal order size for music systems from Roxconn is approximately 2,828 units.

To find the order frequency:

N = D/Q

N = 10,000/2,828

N ≈ 3.54

So, the company should place orders with Roxconn approximately 3.54 times per month,
but since we can't place a fraction of an order, let's say they place 4 orders per month.

For Tlextronics (control panels):

 Monthly demand (D) for control panels: 4,000 units

 Cost per unit (C): $400

 Holding cost per unit per year (H): 25% of $400 = $100

 Fixed cost per shipment (S): $10,000

Using the same EOQ formula:

EOQ=
√2 DS
H

EOQ=√ (2¿¿ 4 , 000∗10,000)/100 ¿

EOQ=√ 8 , 00 ,0 00

EOQ=894.43

The optimal order size for control panels from Tlextronics is approximately 894 units.

To find the order frequency:

N=D/Q
N=4,000/894

N=4.47

Again, since we can't place a fraction of an order, let's say they place 5 orders per month.

Combining all assembly with a single contract manufacturer. This would allow for a single
shipment of all products from Asia. The fixed cost of each shipment remains $10,000.

Combined orders from a single contract manufacturer:

 Total monthly demand for both music systems and control panels: 10,000 (music
systems) + 4,000 (control panels) = 14,000 units

 Total holding cost per unit per year for both products: 25% of ($100 + $400) = $125
per unit

Using the EOQ formula for the combined order:

EOQ= √
2 DS
H

EOQ=√ (2¿¿ 1 4,000∗10,000)/125 ¿

EOQ=√ 22, 4 0 , 0 00

EOQ=1,496.66

The optimal order size for the combined orders is approximately 1,497 units.

To find the order frequency:

N=D/Q

N=14,000/1,497

N = 9.36

Let's round this down to 9 orders per month since we can't place a fraction of an order.

Calculation of the reduction in cycle inventory as a result of combining orders

and shipments:
 For Roxconn and Tlextronics separately:

Total cycle inventory = EOQ / 2 = 2,828.43 (music systems) / 2 + 894.43 (control

panels)/ 2

= 1,414.21 + 447.22
 = 1,861.43 units.

 For combined orders: Total cycle inventory = EOQ / 2 = 1,496.66 units.

The reduction in cycle inventory is the difference:

Reduction = (1,861.43 units - 1,496.66 units) = 364.77 units

So, by combining orders and shipments, the company can expect a reduction in cycle
inventory of approximately 365 units.