Please use this information and not answers that have already been answered on chegg! THIS IS A DIFFERENT PROBLEM.
Question: a) Calculate the financial impact of increasing the order fill rate to 98% from 94%, and write your answer using the given table. b) Describe what your suggestion is. Hint: For the 98% case, use the information given below. 1. Assume that an annual order amount is 820,000. (Improved fill rate increases the demand) 2. The additional \$1 million investment in a locator system is considered an additional warehouse cost. 3. Assume that the company borrowed \$1 million for a new stock locator system from the bank. Colleen Starkey never thought she would be able to sell paper products to consumers on the internet. However, after five years in business, Paper.com has reached \$120 million in revenue. Paper.com specializes in shipping paper-related products from numerous suppliers to customers, including diapers, paper towels, and facial tissue. Because these items have a tiny margin, Colleen knows she needs to control costs and, simultaneously, have high service levels. Paper.com receives 800,000 orders annually, with an average revenue per order of $150 and a cost of goods per order of $70.00. Paper.com's current order fill rate is 94%. Colleen estimates that of the orders not filled correctly or completely, 20% of the customers cancel their orders, and 80% will accept a reshipment of the correct/unfilled items. These rehandling costs Paper.com $20 per order. To retain customers, Paper.com reduces the invoice value of rehandled orders by $30. Paper.com pays $3,000,000 for inbound and outbound transportation from its warehouses. Its warehousing costs are $1,950,000 annually. In addition, Paper.com has $30 million of debt at an annual interest rate of 10%. Other operating costs are $1.5 million annually, and Paper.com maintains $200,000 in cash at all times. Paper.com has an average inventory of 95,000 units. This inventory level is necessary to help fill consumer orders correctly the first time. The inventory carrying cost rate per unit is 10% of the price. Its accounts receivable average $400,000 annually. Paper.com owns three warehouses that are valued in total at $97 million. The net worth of Paper.com is $50 million. Colleen has decided that a 94% order fill rate is unacceptable in the market, and lost customers and rehandled orders negatively affect profits. She has decided to invest $1 million in a new warehouse stock locator system, increase inventories by 15%, and improve the on-time delivery of inbound shipments by contracting with a new carrier. This carrier upgrade will increase total transportation costs by 12%. Colleen hopes these changes will increase the order fill rate to 98%. Paper.com faces a current tax rate of 40%. b) Question: a) Calculate the financial impact of increasing the order fill rate to 98% from 94%, and write your answer using the given table. b) Describe what your suggestion is. Hint: For the 98% case, use the information given below. 1. Assume that an annual order amount is 820,000. (Improved fill rate increases the demand) 2. The additional \$1 million investment in a locator system is considered an additional warehouse cost. 3. Assume that the company borrowed \$1 million for a new stock locator system from the bank. Colleen Starkey never thought she would be able to sell paper products to consumers on the internet. However, after five years in business, Paper.com has reached \$120 million in revenue. Paper.com specializes in shipping paper-related products from numerous suppliers to customers, including diapers, paper towels, and facial tissue. Because these items have a tiny margin, Colleen knows she needs to control costs and, simultaneously, have high service levels. Paper.com receives 800,000 orders annually, with an average revenue per order of $150 and a cost of goods per order of $70.00. Paper.com's current order fill rate is 94%. Colleen estimates that of the orders not filled correctly or completely, 20% of the customers cancel their orders, and 80% will accept a reshipment of the correct/unfilled items. These rehandling costs Paper.com $20 per order. To retain customers, Paper.com reduces the invoice value of rehandled orders by $30. Paper.com pays $3,000,000 for inbound and outbound transportation from its warehouses. Its warehousing costs are $1,950,000 annually. In addition, Paper.com has $30 million of debt at an annual interest rate of 10%. Other operating costs are $1.5 million annually, and Paper.com maintains $200,000 in cash at all times. Paper.com has an average inventory of 95,000 units. This inventory level is necessary to help fill consumer orders correctly the first time. The inventory carrying cost rate per unit is 10% of the price. Its accounts receivable average $400,000 annually. Paper.com owns three warehouses that are valued in total at $97 million. The net worth of Paper.com is $50 million. Colleen has decided that a 94% order fill rate is unacceptable in the market, and lost customers and rehandled orders negatively affect profits. She has decided to invest $1 million in a new warehouse stock locator system, increase inventories by 15%, and improve the on-time delivery of inbound shipments by contracting with a new carrier. This carrier upgrade will increase total transportation costs by 12%. Colleen hopes these changes will increase the order fill rate to 98%. Paper.com faces a current tax rate of 40%. b)
