Question
Assume you work for an industrial distributor. You can buy a particular type of switch from a variety of manufacturers. For this switch, you experience
Assume you work for an industrial distributor. You can buy a particular type of switch from a variety of manufacturers. For this switch, you experience an average weekly demand of 500 units with a standard deviation of 100. You provide the items from stock and want to maintain a 99% cycle service level. You review your inventory and place new orders every week. Your inventory carrying cost is 12%. You are considering two suppliers, ABC and XYZ. Each supplier sells the switch for $50. Based on your experience with the suppliers, ABC will be able to provide the switch with a lead time of 4 weeks and a standard deviation of 2. XYZ will provide the switch with a lead time of 12 weeks and no standard deviation. Which supplier should you pick? Why (back this up with some evidence)?
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