Question
6. Weekly demand for shoes at an apparel retailer is normally distributed with a mean of 500 and a standard deviation of 250. The
6. Weekly demand for shoes at an apparel retailer is normally distributed with a mean of 500 and a standard deviation of 250. The retailer currently sources its shoes from a supplier in overseas that delivers orders at a cost of $9.5 per pair of shoes. The lead time required by the supplier is normally distributed with a mean of 10 weeks and a standard deviation of 5 weeks. A local supplier has offered to deliver shoes with a guaranteed lead time of 1 week at a cost of $9.75 per pair of shoes. The retailer has an annual holding cost of 25 percent and targets a cycle service level of 99 percent. Should the retailer accept the local supplier's offer? (In calculating total costs, only consider: the safety stock holding cost + purchasing cost). (20 points)
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