OPERATIONS MANAGEMENT
OPERATIONS MANAGEMENT
14th Edition
ISBN: 9781260961393
Author: Stevenson
Publisher: MCG
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Chapter 15.14, Problem 2.2RQ
Summary Introduction

To explain: The example that this case provides for future entrepreneurs.

Case summary: In the given case, Company H helps customers to protect them from the hassle of sending their returns and then waiting to get their refunds by offering an easy alternative of a drop-off package in user-friendly kiosks. The company located these kiosks in different locations across the country from where people can easily get a refund in real-time. The process of refund from this package just takes one minute by following the simple steps of accessing the original order on an integrated tablet, selecting the appropriate item, and then choosing to return or exchange. The items travel to return hubs from kiosks after shipment for the approval of the return.

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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.)
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