Answered step by step
Verified Expert Solution
Question
1 Approved Answer
please help Sanford Systems is attempting to set the customer service level (using in-stock probability at the DCs) for the premier markers sold to Office
please help
Sanford Systems is attempting to set the customer service level (using in-stock probability at the DCs) for the premier markers sold to Office Depot outlets. Annual sales of this marker is 180,000 cases, or 3460 cases weekly with a standard deviation of 650 cases. The cost of a case of markers in inventory is $9.00 to which $0.95 is added for the profit margin. Stock review and replenishment is every week, and the demand during this time is assumed to be normally distributed. The annual cost of carrying the inventory is 20\%. Management estimates that a 0.14% change in total revenue would occur for each 1% change in the in-stock probability. a. Find the optimum service level for this item. The change in service levels and the accompanying change in z-scores are shown below. Show all calculations. (15 points) b. You now must explain to your boss your answer. To do so, write a concise, two to three sentence statement that summarizes and incorporates the revenue and cost components of the analysis above. ( 5 points) Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started