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Assume an organization's current service level on order fill is as follows: Current order fill = 82% Number of orders per year = 5500 Percentage
Assume an organization's current service level on order fill is as follows: Current order fill = 82% Number of orders per year = 5500 Percentage of unfilled orders backordered: 80% Percentage of unfilled orders cancelled: 20% Backorder costs per order = $140 Invoice deduction per order = $300 Lost pretax profits per cancelled order = $13,000 Answer the following questions: A. What is the lost cash flow to the seller at this 82% service level? B. What would be the resulting increase in cash flow if the seller improved order fill rate to 95%? C. If the seller invested $2 million to produce this increased service level, would the investment be justified financially? Deliverables for this assignment: 1. Submit your calculations in an Excel spreadsheet 2. Show (spell out the formula used for each calculation; show all work and answers
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