3) SERVICE SENSITIVITY ANALYSIS: BALANCING TRADE OFFS Currently, you are purchasing product from a supplier in...

 

Transcribed Image Text:

3) SERVICE SENSITIVITY ANALYSIS: BALANCING TRADE OFFS Currently, you are purchasing product from a supplier in Youngstown, OH and shipping by the truckload to your manufacturing facility in Billings, MT. For the transportation, you rely on two primary carriers. Carrier A's lead time averages about 8 days with a standard deviation of 2 days. Carrier B's lead time averages 5 days with a standard deviation of 1.5 days. Based on the following demand, compare the impact on safety stock at a 97% service level between the two carriers to help make a more informed decision. Daily Demand 2500 cases 2600 cases 2850 cases 3000 cases Frequency 4 14 10 2 a. What is the difference in safety stock requirements between Carrier A and Carrier B? (10 pts) b. How much could we save on carrying cost each year with an ICC of $15 per case? (4 pts) c. If Carrier B costs $18,000 more per year, which carrier do you recommend contracting with for the upcoming year? Why? (2 pts) RE 3) SERVICE SENSITIVITY ANALYSIS: BALANCING TRADE OFFS Currently, you are purchasing product from a supplier in Youngstown, OH and shipping by the truckload to your manufacturing facility in Billings, MT. For the transportation, you rely on two primary carriers. Carrier A's lead time averages about 8 days with a standard deviation of 2 days. Carrier B's lead time averages 5 days with a standard deviation of 1.5 days. Based on the following demand, compare the impact on safety stock at a 97% service level between the two carriers to help make a more informed decision. Daily Demand 2500 cases 2600 cases 2850 cases 3000 cases Frequency 4 14 10 2 a. What is the difference in safety stock requirements between Carrier A and Carrier B? (10 pts) b. How much could we save on carrying cost each year with an ICC of $15 per case? (4 pts) c. If Carrier B costs $18,000 more per year, which carrier do you recommend contracting with for the upcoming year? Why? (2 pts) RE