Question: Hi Tek is a retailer of computer equipment in the

Hi- Tek is a retailer of computer equipment in the greater Chicago region with four retail outlets. Currently, each outlet manages its ordering independently. Demand at each retail outlet averages 4,000 units per week. Each unit costs $ 200, and Hi-Tek has an annual holding cost of 20%. The fixed cost of each order (administrative transportation) is $ 900. Assume 50 weeks in a year.
a. Given that each outlet orders independently and gets its own delivery, determine the optimal order size at each outlet.
b. On average, how long (in weeks) does each unit spend in the Hi- Tek system before being sold?
c. Hi-Tek is thinking of centralizing purchasing (for all four outlets). In this setting, Hi-Tek will place a single order (for all outlets) with the supplier. The supplier will deliver the order on a common truck to a transit point. Since individual requirements are identical across outlets, the total order is split equally and shipped to the retailers from this transit point. This entire operation will increase the fixed cost of placing an order to $ 1,800. If Hi-Tek manages ordering optimally, determine the aver-age inventory across all four outlets in the new Hi-Tek system.

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  • CreatedNovember 06, 2015
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