Is it more cost-effective for groundz to switch suppliers

Assignment Help Operation Management

Reference no: EM13224797

Groundz Coffee Shop uses 4 pounds of a specialty tea weekly; each pound costs $16. Carrying costs are $1 per pound per week because space is very scarce. It costs the firm $8 to prepare an order. Assume Groundz is open 52 weeks per year, and closed on Mondays. a) How many pounds should Groundz order at a time? (8) b) What is the total annual cost of managing this item? ($416 or $3744) c) The lead time for orders to arrive is 1.5 (work) weeks. If the standard deviation of weekly demand is 1.2 pounds, and Groundz wishes to achieve at least a 98% customer satisfaction level, what is the reorder point? (9.03) d) Groundz has been contacted by a new supplier who is offering to sell the same tea for $12 per pound. In return, Groundz can place orders only once a month. Inventory and ordering costs would remain the same. Is it more cost-effective for Groundz to switch suppliers? Should Groundz switch? (new total cost $3042.67, switch)

Reference no: EM13224797

Questions Cloud

Elements of strategy for home depot : Identify the 5 elements of strategy for Home Depot and do a SWOT analysis for Home Depot and provide recommendations for strategy based on the opportunities and strengths you have identified.

What is the safety stock : The target inventory is 1762 motors. a) What is the safety stock? b) What service level is achieved?

Compute the profit earned from a typical consumer : b) What will be the firm's profit with perfect price discrimination c) To implement perfect price discrimination you will have to use salespersons. What is the maximum amount total you will spend on salespersons

What is the annual holding cost of maintaining the level : What is the annual holding cost of maintaining the level of safety stock needed to support a 1% risk? g) If management specified that a 2% risk of stock-out during lead time would be acceptable, would our safety stock holding costs decrease or inc..

Is it more cost-effective for groundz to switch suppliers : Groundz can place orders only once a month. Inventory and ordering costs would remain the same. Is it more cost-effective for Groundz to switch suppliers? Should Groundz switch? (new total cost $3042.67, switch)

Conduct a complete study of the external environment : Conduct a complete study of the external environment in which Fiat competes, and identify the critical strategic factors

How the availability of newer tools might have affected : Discuss how the availability of newer tools might have affected the choices and priorities on which Alex focused.

What are the internal areas : What are the internal areas that should be considered in analyzing a firm's resources and opportunities?

What is the overall equipment effectivness of the high-speed : although it was designed to make four copies per second. Data suggests that about 3% of the copies pages must be scrapped and recopied. What is the overall equipment effectivness of the high-speed copier?

User Account

All Pages