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What if scenario (using the data below) ... The consulting agency could negotiate with the supplier that had the higher annual cost. At what target
What if scenario (using the data below) ... The consulting agency could negotiate with the supplier that had the higher annual cost. At what target cost per uniform does the higher cost supplier need to get down to in order to become the least cost supplier? Purchases 75 uniforms per week from a local laundry service at an average cost of $18.05 per uniform. The average lead-time is two days and delivers the uniforms in batches of 30. The standard deviation on the local laundry service lead-time has been one day. Another potential source that will charge $17.95 per uniform. They state they have an average lead-time of one week with a standard deviation of 3 days. Also require a minimum batch size of 150 uniforms. Ignore ordering costs and use holding costs at 20% of material cost. Assume the consulting agency continuously reviews inventory and aims for a cycle service level of 95%. Weekly demand for the uniforms has a mean of 60 with a standard deviation of 10
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