In a drive to cut down the costs of inventory, there are two options for the top management to consider.
Option 1: Decreases the inventory review cycle to 13 weeks and push the vendor to reduce the lead time to 5 weeks. Keep the service level at each store the same (95%).
Option 2: Close all physical stores and move the company on-line. Fill all customer orders through a consolidated central warehouse. Assume the lead time is still 10 weeks and the service level is still 95%. In addition, the review cycle is still 26 weeks.
Option 3: Keep the physical store. However, instead of having clocks engraved at the supplier’s site, each store will engrave the proper words to the clock once a customer orders it in store. Thus, the vendor will only supply the clock without words on it. Decreases the inventory review cycle to 13 weeks and push the vendor to reduce the lead time to 5 weeks. Keep the service level at each store the same (95%).
What is the total safety stock Precious Things holds for clock with word “Aggies” if it chooses option 1?
What is the total safety stock Precious Things holds for clock with word “Aggies” if it chooses option 2?
What is the total safety stock Precious Things holds for clock without words if it chooses option 3?