Scenario 9.2
Shipments of Product X from a plant to a wholesaler are made in lots of 600. The wholesaler's average demand for X is 100 units per week. The lead time from the plant to the wholesaler is 4 weeks. The wholesaler pays for the shipments when they leave the plant.
-Refer to Scenario 9.2. If the plant reduces its shipment lot size from 600 to 400 units and keeps its 4 week lead time, what is the wholesaler's new total cycle plus pipeline inventories?
A) 600 units
B) 300 units
C) 500 units
D) 400 units

Question

Quizplus · Accepted Answer

The wholesaler's total cycle plus pipeline inventories is equal to the sum of the average demand during the lead time and the average inventory in the pipeline. The average demand during the lead time is equal to the average demand per week multiplied by the lead time in weeks. The average inventory in the pipeline is equal to half of the shipment lot size. If the plant reduces its shipment lot size from 600 to 400 units, the wholesaler's new total cycle plus pipeline inventories will be equal to (100 units/week * 4 weeks) + (400 units / 2) = 600 units.

Scenario 9.2 Shipments of Product X from a Plant to a Wholesaler