Suppose two truck services are being considered for deliveries from a company plant to one of its warehouses. Service B is cheaper but slower and less reliable than service A. The following information has been assembled:
Demand (known) ........................................... 9,600 cwt./year
Order cost .................................................... $100/order
Product price, f.o.b. source ................................ $50/cwt.
Shipping quantity ........................................... As per EOQ
In-transit carrying cost ...................................... 20%/year
Inventory-carrying cost ..................................... 30%/year
In-stock probability during the lead time ................. 90%
Out-of-stock costs ........................................... Unknown
Selling days ................................................... 365 days/year

A reorder point control method of inventory control is used at the warehouse. From the point of view of the inventory in the warehouse, which truck service should be selected?

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Service 4 days 1.5 days $12.00/cwt 5 days 1.8 days $11.80/cwt Transit time (LT) Variability (std. dev, SLy) Rate