What is the best inventory policy for the cable? How does this compare with the current policy of placing a regular order every week?
What is the best inventory policy for the cable? How does this compare with the current policy of placing a regular order every week?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Arcadia Windings is concerned about its stocks of copper cable. The demand for this is 8,000 meters a week, with a cost of £ 4 a meter. Each order costs £ 350 for administration and £ 550 for delivery, and has a lead time of 8 weeks. Holding costs are about 25 per cent of value held a year, and any shortages would disrupt production and give very high costs. What is the best inventory policy for the cable? How does this compare with the current policy of placing a regular order every week?
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