Exercise 15:

Return to the Epson data in Exercise 15. Each printer costs Epson $200, and the annual holding cost is 25 percent. What saving in holding cost can Epson expect as a result of build- ing the European DC? If final assembly in the European DC adds $5 to the production cost of each printer, would you rec- ommend the move? Suppose that Epson is able to cut the pro- duction and delivery lead time from its Taiwan factory to four weeks using good information systems. How much savings in holding cost can Epson expect without the European DC? How much savings in holding cost can the firm expect with the European DC? 15. Epson produces printers in its Taiwan factory for sale in Europe. Printers sold in different countries differ in terms of the power outlet as well as the language of the manuals. Cur- rently, Epson assembles and packs printers for sale in indi- vidual countries. The distribution of weekly demand in different countries is normally distributed, with means and standard deviations as shown in Table 12-6. Assume demand in different countries to be indepen- dent. Given that the lead time from the Taiwan factory is eight weeks, how much safety inventory does Epson require in Europe if it targets a CSL of 95 percent? Epson decides to build a central DC in Europe. It will ship base printers (without power supply) to the DC. When an order is received, the DC will assemble power supplies, TABLE 12-6 Weekly Demand for Epson Printers in Europe Country Mean Demand Standard Deviation France Germany Spain Italy Portugal UK 3,000 4,000 2,000 2,500 1,000 4,000 2,000 2,200 1,400 1,600 800 2,400 add manuals, and ship the printers to the appropriate country. The base printers are still to be manufactured in Taiwan with a lead time of eight weeks. How much saving of safety inven- tory can Epson expect as a result