>> Operation Management
current mode mix Proposed mode mix
Average transit time(days) 20 12
std. deviation of transit time(days) 5 2
Demand per day(units) 2250 2250
Service level 85.02% 91.98%
Net cost per unit 125 125
Inventory carrying cost 30% 30%
Price per unit 200 200
cost of capital 14% 14%
1)What is the difference in units of safety stock inventory between the current mode mix and the proposed mode mix?
2)Combining the safety stock inventory reduction with the demand inventory carrying cost reduction results in a total annual inventory carrying cost dollar reduction of?
3)What is the total net cash flow savings form the proposed mode mix if freight premium of 18% based on the total inventory value the difference in total inventory between the two mode alternatives?