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As the logistics representative on a manufacturer's sales team, you have been asked to quantify the benefits that can be sold to a customer using
As the logistics representative on a manufacturer's sales team, you have been asked to quantify the benefits that can be sold to a customer using more consistent service and transportation. The customer wants percent case availability from its distribution centers that are resupplied from the manufacturer. The average daily demand in cases from the customer's DC is units with a standard deviation of Historically, the replenishment performance cycle has been days with a standard deviation of four days.The customer has traditionally used a percent inventory carrying cost, and the average value of each case is $ The customer orders weekly an order quantity of units.a What is the average inventory and annual carrying cost for the currentsituation?b What is the average inventory and carrying cost impact of reducing themanufacturer's performance cycle variation by days?c How does reducing the performance cycle variation by days comparewith reducing the average performance cycle length by days in terms ofaverage inventory and inventory carrying cost?
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