Business Finance Homework Help

You are a purchasing manager in charge of stocking a certain type of products. Weekly demand for these products is normally distributed, with a mean of 100 and a standard deviation of 50. Holding costs are 25%, and you must hold a level of inventory corresponding to a cycle service level of 95%.

You are faced with two suppliers, QUALITY Products and BEST Products, who offer the following terms. QUALITY sells the products for €5,000 with a minimum order of 100, and a lead time of 1 week with a standard deviation of 0.1 week. BEST sells the transformer for €4,800, has a minimum batch of 1,000, a lead time of 5 weeks, and a lead-time standard deviation of 4 weeks.

What is the annual cost of using QUALITY as a supplier?

What is the annual cost of using BEST as a supplier?

Which supplier would you choose? Justify your choice

1. If you could use both suppliers, how would you structure your orders?
2. Describe the dimensions of supplier performance that affect total cost