A firm uses the order-up-to model to manage its inventory. It wants to increase its in-stock probability

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A firm uses the order-up-to model to manage its inventory. It wants to increase its in-stock probability while decreasing its holding costs (i.e., reducing its average inventory). Which of the following actions will help to achieve this goal? (Consider each action independently.) 

I. Decrease the lead time. 

II. Increase the order-up-to level. 

III. Increase the average quantity on order. 

a. Only I. 

b. Only II. 

c. Only III. 

d. I and II. 

e. I and III. 

f. II and III. 

g. Any of them will help (that is I, II, or III). 

h. None of them will help.

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Operations Management

ISBN: 9781260547610

2nd International Edition

Authors: Gerard Cachon, Christian Terwiesch

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