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Harvey's Specialty Shop is a popular spot that specializes in international gourmet foods. One of the items that Harvey sells is a popular mustard that
Harvey's Specialty Shop is a popular spot that specializes in international gourmet foods. One of the items that Harvey sells is a popular mustard that he purchases from an English company. The mustard costs \$26 a jar and requires a 3-month lead time for replenishment of stock. The replenishment time is constant. Harvey uses a 20% annual interest rate to compute holding costs. Bookkeeping expenses for placing an order amount to about $60. During the 3-month supply time, Harvey estimates that he sells an average of 150 jars but there is substantial variation. He estimates the standard deviation of demand for each 3-month period is 25 . Assume that demand is described by a normal distribution. (5+5+5+12+13+20=60 points) f) In order to achieve 96% fill rate service, what will be the optimal total inventory cost (Ordering + Holding + Purchase) before and after the decrease of lead time (and resultant price increase)? What managerial insights can you get from this
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