A high-end car dealership orders engine control modules (ECMs) from a distributor with a three-week lead time.
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Question:
- A high-end car dealership orders engine control modules (ECMs) from a distributor with a three-week lead time. The dealership does an average of six ECM replacement jobs per week for the 52-week year. Demand for those jobs is normally distributed with a variance of four per week. The dealership's cost for the ECMs is $1,600 per unit plus a $450 fixed cost per order. Current rates put the price for each ECM replacement job at $1,770. Assume a 10% annual inventory carrying charge.
- a. What is the dealership's optimal ECM order quantity?
- b. What is the dealership's optimal ECM reorder point?
- c. Approximately how much does the dealership incur annually on ECM inventory holding and ordering costs?
Related Book For
Operations Management Processes And Supply Chains
ISBN: 9781292409863
13th Global Edition
Authors: Lee Krajewski, Naresh Malhotra, Larry Ritzman
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