Should the manufacturer accept the local suppliers offer

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Reference no: EM13901831

Weekly demand for electric motors at a Japanese motor manufacturer is normally distributed, with a mean of 1,000 and a standard deviation of 1,000. Motors are currently assembled in China and delivered at a cost of 20,000 yen/motor. The supplier takes eight weeks to supply an order. A local Japanese manufacturer has offered to deliver motors with a lead time of one week at a cost of 20,400 yen per motor. The motor manufacturer is targeting a Cycle Service Level (Type I) of 99 percent and monitors its inventory continuously with (Q, r) policy. The manufacturer incurs a holding cost of 25 percent. Should the manufacturer accept the local supplier’s offer?

Reference no: EM13901831

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