Is it more cost-effective for groundz to switch suppliers

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Reference no: EM13224828

Groundz Coffee Shop uses 4 pounds of a specialty tea weekly; each pound costs $16. Carrying costs are $1 per pound per week because space is very scarce. It costs the firm $8 to prepare an order. Assume Groundz is open 52 weeks per year, and closed on Mondays. a) How many pounds should Groundz order at a time? (8) b) What is the total annual cost of managing this item? ($416 or $3744) c) The lead time for orders to arrive is 1.5 (work) weeks. If the standard deviation of weekly demand is 1.2 pounds, and Groundz wishes to achieve at least a 98% customer satisfaction level, what is the reorder point? (9.03) d) Groundz has been contacted by a new supplier who is offering to sell the same tea for $12 per pound. In return, Groundz can place orders only once a month. Inventory and ordering costs would remain the same. Is it more cost-effective for Groundz to switch suppliers? Should Groundz switch? (new total cost $3042.67, switch)

Reference no: EM13224828

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