The Winfield Distributing Company has maintained an 80% service level policy for inventory of string trimmers. Mean demand during the reorder period is 200 trimmers, and the standard deviation is 65 trimmers. The annual cost of carrying one trimmer in inventory is $6. The area salespeople have recently told Winfield's management that they could expect a $300 improvement in profit (based on current figures of cost per trimmer) if the service level were increased to 95%. Is it worthwhile for Winfield to make this change?
The Winfield Distributing Company has maintained an 80% service level policy for inventory of string trimmers. Mean demand during the reorder period is 200 trimmers, and the standard deviation is 65 trimmers. The annual cost of carrying one trimmer in inventory is $6. The area salespeople have recently told Winfield's management that they could expect a $300 improvement in profit (based on current figures of cost per trimmer) if the service level were increased to 95%. Is it worthwhile for Winfield to make this change?
Purchasing and Supply Chain Management
6th Edition
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Chapter16: Lean Supply Chain Management
Section: Chapter Questions
Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...
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![The Winfield Distributing Company has maintained an 80% service level policy for inventory of
string trimmers. Mean demand during the reorder period is 200 trimmers, and the standard
deviation is 65 trimmers. The annual cost of carrying one trimmer in inventory is $6. The area
salespeople have recently told Winfield's management that they could expect a $300
improvement in profit (based on current figures of cost per trimmer) if the service level were
increased to 95%. Is it worthwhile for Winfield to make this change?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdc16d5cc-7ebd-4d46-9c1a-7c0bf2ba3cc9%2Fdf1cce36-8d98-41aa-bfae-9ccfeee1a0d3%2Fy7tx7gi_processed.png&w=3840&q=75)
Transcribed Image Text:The Winfield Distributing Company has maintained an 80% service level policy for inventory of
string trimmers. Mean demand during the reorder period is 200 trimmers, and the standard
deviation is 65 trimmers. The annual cost of carrying one trimmer in inventory is $6. The area
salespeople have recently told Winfield's management that they could expect a $300
improvement in profit (based on current figures of cost per trimmer) if the service level were
increased to 95%. Is it worthwhile for Winfield to make this change?
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