Question

Weekly demand for private label washing machines at Karstadt, a German department store chain, is normally distributed with a mean of 500 and a standard deviation of 300. Karstadt currently has a supply source in China that delivers machines at a cost of 200 euro. The lead time required by the supplier is normally distributed with a mean of nine weeks and a standard deviation of six weeks. A European supplier has offered to deliver washing machines with a guaranteed lead time of one week at a cost of 210 euro. Karstadt has a holding cost of 25 percent and targets a cycle service level of 99 percent. Should Karstadt accept the local supplier’s offer?

Answer 1

Answer:

Step-by-step explanation:

Mean, D = 500

Standard deviation, ao = 300

Mean, L = 9 weeks

Standard deviation, .s1 = 6 weeks

Use the following formula to calculate safety stock level:

Safety stock =   = 2093.7

In case of European supplier,

Safety stock =  = 699