1. An electronics firm manufactures and sells their PCBAs to tier 3 auto suppliers. One of the diodes required for their most popular PCBA has an annual demand of 5000. Currently, this firm is paying $6.40 per diode with no minimum order quantity restrictions, their carrying (holding) cost is 25% of the unit cost, and their ordering costs total $25 per order. A new supplier is offering this firm to buy the diodes from them at a cost of $6.00 per unit, as long as they buy 3000 per order. Should the firm take advantage of the new suppliers offer (discount)? Or stick with the old (current) supplier?

2. Considering the electronics firm in question 1 (above), analysis shows that the demand for their jump-drive PCBAs during supplier lead time averages 50 units (normally distributed), with a measured standard deviation of 5 jump-drive PCBAs. Management wants to sustain a 97 % service level to their customers.

1. What value of Z would you apply? (See attached table for Z-scores according to the standard/published normal curve areas).
2. How many jump-drive PCBAs should be carried as safety stock?
3. What is the appropriate reorder point?