Question: A computer cable manufacturing company is evaluating two outside suppliers for a connector that is used in its production. The following data are known: The
A computer cable manufacturing company is evaluating two outside suppliers for a connector that is used in its production. The following data are known:
The daily usage for the connectors follows a Normal distribution with an average of and a standard deviation of
Assume working days every year.
Annual inventory holding cost of this connector is assessed as of the purchase cost.
It wants to achieve a service level for the connector.
Each unit of shortage costs $
Supplier A is local, so it provides a faster and more reliable lead time, and the shipping cost is also lower. Supplier B is a bigger, national supplier, and it can offer a better price on each unit purchase cost The relevant parameters are given in the following table.
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