ViteVite is a new international shipping company that promises to cut lead times for planters to HG retailers from 4 weeks to 1 week, through faster transportation and a streamlined pre-clearance process. If HG were to use ViteVite, the ordering cost would remain $10,000 but the purchase cost would increase by 2 ($0.02) per planter. Demand and other unit costs would not change.

Should HG use ViteVite for its logistics needs?

Choose the best answer from the following options.

Question 4 options:

Yes. With ViteVite, on an annual basis, the increase in purchasing cost is less than the savings in storage costs resulting from the reduction in lead time.

No. With ViteVite, on an annual basis, the reduced QEC, combined with the higher safety stock levels, will increase the cost of purchase and the cost of warehousing.

Yes. With ViteVite, on an annual basis, the increase in QEC will compensate for the shorter delivery times.

No. With ViteVite, on an annual basis, the increase in purchasing cost is greater than the savings in storage costs resulting from the reduction in delivery time.