Purchasing and Supply Chain Management
6th Edition
ISBN: 9781285869681
Author: Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher: Cengage Learning
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Chapter 14, Problem 5DQ
Summary Introduction
To explain: The firms that are best suited to use turnkey system contracts for information systems development.
Contract management:
It is the management of contract creation, analysis and execution to maximize the operational and financial performance while reducing the risks involved. In order for contract management to be successful, both parties involved in the contract must be flexible towards changing circumstances.
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Sam's Pet Hotel operates 51 weeks per year, 6 days per week, and uses a continuous review inventory system. It purchases kitty litter for $11.00 per bag.
The following information is available about these bags:
> Demand
95 bags/week
> Order cost $52.00/order
> Annual holding cost = 25 percent of cost
> Desired cycle-service level = 80 percent
>Lead time 4 weeks (24 working days)
> Standard deviation of weekly demand = 15 bags
> Current on-hand inventory is 320 bags, with no open orders or backorders.
a. Suppose that the weekly demand forecast of 95 bags is incorrect and actual demand averages only 75 bags per week. How much higher will total
costs be, owing to the distorted EOQ caused by this forecast error?
The costs will be $
higher owing to the error in EOQ. (Enter your response rounded to two decimal places.)
Chapter 14 Solutions
Purchasing and Supply Chain Management
Ch. 14 - Where do you believe buyers spend most of their...Ch. 14 - What are the risks to buyers associated with each...Ch. 14 - What are the risks to suppliers associated with...Ch. 14 - Prob. 5DQCh. 14 - Prob. 6DQCh. 14 - Why do consultants typically want to avoid...Ch. 14 - Under what conditions are short-term contracts...Ch. 14 - Certain industries, such as the computer industry,...Ch. 14 - What are the implications for contract writing as...Ch. 14 - What are the dangers associated with taking an old...
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