Average inventory-annual carrying cost for current situation

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Reference no: EM132110974

As the logistiocs representatives on a manufacturers sales team, you have been asked to quantify the benefits that can be sold to a customer using more consitent service and transportation. The customer wants 99 percent case avalibility from its distobution centers that are resupplied from the manufacturer. The average daily demand in cases from the customers DC is 1000 units with a standard deviation of 250. Historically , the replenishment performance cycle has been 10 days with a standard deviation of 4 days. The customer has traditionally used 20 percent inventory carrying cost , and the average value of each case is $25. The customer orders weekly an order quantity of 7,000 units .

A. What is the average inventory and annual carrying cost for the current situation?

B. What is the average inventory and carrying cost impact of reducing the manufacturers performance cycle variation by two days?

C. How does reducing the performance cycle variation by 2 days compare with reducing the average performance cycle length by 2 days in terms of average inventory and inventory carrying cost?

Reference no: EM132110974

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