Question: Firm A faces the following:
- 75 units per order 1500 orders per year
- Net cost per unit = $350
- 70% of incomplete orders backordered;
- 30% cancelled Backorder costs per backorder = $350
- Invoice deduction per backordered order = $325
What is the total lost profit or cash flow at a 80% order fill rate?
What is the total lost profit or cash flow at a 90% order fill rate?
What is the percentage decrease in lost profit or cash flow from this 10% increase in order fill rate?