An inventory management strategy should work towards:
A)increasing order sizes.
B)decreasing order sizes.
C)increasing safety stocks.
D)increasing demand.
E)None of the above.
The manager of the Quick Stop Corner Convenience Store (which never closes)sells four cases of beer each day.Ordering costs are $8 per order,and beer costs $0.80 per six-pack (each case of beer contains four six-packs).Orders arrive three days from the time they are placed.Daily holding costs are equal to 5% of the cost of the beer.

Question

Quizplus · Accepted Answer

Based on the given information, the Quick Stop Corner Convenience Store should aim to decrease order sizes. The current demand for beer is four cases each day, which is equivalent to 16 six-packs. With a lead time of three days, the store should place an order for 48 six-packs to cover the next three days of demand. Each order incurs an $8 ordering cost, so minimizing the number of orders will reduce these costs. Additionally, holding costs are 5% of the cost of the beer, so reducing the amount of beer held in inventory will also reduce these costs. By decreasing order sizes to match the demand for the next three days, the store can minimize both ordering and holding costs, leading to a more efficient inventory management strategy.

An Inventory Management Strategy Should Work Towards