Question: As a purchasing manager at a large electric utility, you are faced with two suppliers, Reliable Components and Value Electric, that offer the following terms.
As a purchasing manager at a large electric utility, you are faced with two suppliers, Reliable Components and Value Electric, that offer the following terms. Reliable sells the transformer for $ with a minimum order of and a lead time of week with a standard deviation of week. Value sells the transformer for $ has a minimum batch of a lead time of weeks, and a standard deviation of weeks. Imagine that you have chosen Reliable as your supplier. Value Electric wants your business and offers you the choice of three mutually exclusive alternatives: reduce lead time by week, reduce the minimum batch to or reduce the standard deviation of lead time to weeks. a What are the expected annual costs of undertaking each of these options? b What is the expected annual cost if all three could be put into effect? c Would you change your decision to go with Reliable for any of these options?
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