Case 8.1 Low Nail Company After making some wise short-term investments at a race track, Chris Low had some additional cash to invest in a business. The most promising opportunity at the time was in building supplies, so Low bought a business that specialized in sales of one size of nail. The annual volume of nails was 2,000 kegs, and they were sold to retail customers in an even flow. Low was uncertain how many nails to order at any time. Initially, only two costs concerned him: orderprocessing costs, which were $60 per order without regard to size, and warehousing costs, which were $1 per year per keg space. This meant that Low had to rent a constant amount of warehouse space for the year, and it had to be large enough to accommodate an entire order when it arrived. Low was not worried about maintaining safety stocks, mainly because the outward flow of goods was so even. Low bought his nails on a delivered basis. PROBLEM ANALYSIS: Assume that Mr. Low is now concerned about combined variability in sales and lead time and has provided you with the following sales data: Mean Sales (S) =20 units with a standard deviation of of 3 Mean Leadtime (R)=10 days with a standard deviation of of 2.0 He plans to order on the basis of EOQ. Assume EOQ=300 units. What is the one standard deviation of safety stock for Low's line of nails, (Note: you may use the convoluted formula for this question) approximately 40 units None of the above/below Approximately 60 units 110 units PROBLEM ANALYSIS: If Mr. Low were to increase his safety stock from 4 days of sales to 10 days of sales, under current inventory policy (EOQ), his safety stock factor will increase. True/False True False PROBLEM IDENTIFICATION: Considering the scope of information in the Low Nail case, the primary decision maker is Mr. Low. True/False True False Question 2 ( 1 point) PROBLEM IDENTIFICATION: Considering the scope of information provided in the Low Nail Case, the fundamental decision/problem facing the decision maker is determining the least total inventory holding and ordering cost policy. True/False True False Case 8.1 Low Nail Company After making some wise short-term investments at a race track, Chris Low had some additional cash to invest in a business. The most promising opportunity at the time was in building supplies, so Low bought a business that specialized in sales of one size of nail. The annual volume of nails was 2,000 kegs, and they were sold to retail customers in an even flow. Low was uncertain how many nails to order at any time. Initially, only two costs concerned him: orderprocessing costs, which were $60 per order without regard to size, and warehousing costs, which were $1 per year per keg space. This meant that Low had to rent a constant amount of warehouse space for the year, and it had to be large enough to accommodate an entire order when it arrived. Low was not worried about maintaining safety stocks, mainly because the outward flow of goods was so even. Low bought his nails on a delivered basis. PROBLEM ANALYSIS: Assume that Mr. Low is now concerned about combined variability in sales and lead time and has provided you with the following sales data: Mean Sales (S) =20 units with a standard deviation of of 3 Mean Leadtime (R)=10 days with a standard deviation of of 2.0 He plans to order on the basis of EOQ. Assume EOQ=300 units. What is the one standard deviation of safety stock for Low's line of nails, (Note: you may use the convoluted formula for this question) approximately 40 units None of the above/below Approximately 60 units 110 units PROBLEM ANALYSIS: If Mr. Low were to increase his safety stock from 4 days of sales to 10 days of sales, under current inventory policy (EOQ), his safety stock factor will increase. True/False True False PROBLEM IDENTIFICATION: Considering the scope of information in the Low Nail case, the primary decision maker is Mr. Low. True/False True False Question 2 ( 1 point) PROBLEM IDENTIFICATION: Considering the scope of information provided in the Low Nail Case, the fundamental decision/problem facing the decision maker is determining the least total inventory holding and ordering cost policy. True/False True False