Question
Assume an organization's current service level on order fill is as follows: Current order fill= 70% Number of orders per year = 10,000 Percent of
Assume an organization's current service level on order fill is as follows:
Current order fill= 70%
Number of orders per year = 10,000
Percent of unfilled orders back-ordered = 85%
Percent of unfilled orders canceled = 15%
Backorder costs per order = $100
Lost pretax profit per canceled order= $15,000
Invoice deductions per order = $250.00
a- What is the nature of cash flow to increasing order fill rate?
b- Calculate cash flow for order fills rates from 70% to 95%, by 5% increments.
c- What is the nature of cash flow lost to increasing order fill rate?
d- What does this mean to supply chain managers regarding investments to decrease cash flow lost?
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