Scenario 14.2
SoxyBack,a manufacturer of fancy men's socks worn by fashionable gentlemen everywhere,is located in Oshkosh,Wisconsin.The socks are sold directly to fashion-conscious men all over North America.SoxyBack currently divides the United States into ten territories,each with its own sales force.All product inventories are maintained locally in each territory and replenished from Oshkosh every five weeks using UPS.The average replenishment lead time using UPS is one week.UPS charges at a rate of $0.75 + 0.33x where x is the quantity shipped in pounds.The products sold fall into two categories-Dandy and Popinjay.Dandy products weigh 0.2 pounds and cost $350 each.Popinjay products weigh 0.10 pounds and cost $35 each.
Weekly demand for Dandy products in each territory is normally distributed,with a mean of mH = 3 and a standard deviation of sH = 6.Weekly demand for Popinjay products in each territory is normally distributed,with a mean of mL = 25 and a standard deviation of sL = 6.
SoxyBack maintains sufficient safety inventories in each territory to provide a CSL of 0.975 for each product.Annual holding cost at SoxyBack is 30 percent.In addition to the current approach,the management team at SoxyBack is considering two other options:
Option A: Keep the current structure but replenish inventory once a week rather than once every five weeks.
Option B: Eliminate inventories in the territories,aggregate all inventories in a finished goods warehouse at Oshkosh,and replenish the warehouse once a week.
If inventories are aggregated at Oshkosh,orders will be shipped using FedEx,which charges $7.25 + 0.77x per shipment,where x is the quantity shipped in pounds.The factory requires a one-week lead time to replenish finished-goods inventories at the Oshkosh warehouse.An average customer order is for 1 unit of Dandy and 10 units of Popinjay.
-Use Scenario 14.2 to determine the percentage increase in total annual cost of SoxyBack's current system if the cost of transportation triples while all other parameters are held constant.

Question

Quizplus · Accepted Answer

The Answer of Scenario 14.2
SoxyBack,a manufacturer of fancy men's socks worn by fashionable gentlemen everywhere,is located in Oshkosh,Wisconsin.The socks are sold directly to fashion-conscious men all over North America.SoxyBack currently divides the United States into ten territories,each with its own sales force.All product inventories are maintained locally in each territory and replenished from Oshkosh every five weeks using UPS.The average replenishment lead time using UPS is one week.UPS charges at a rate of $0.75 + 0.33x where x is the quantity shipped in pounds.The products sold fall into two categories-Dandy and Popinjay.Dandy products weigh 0.2 pounds and cost $350 each.Popinjay products weigh 0.10 pounds and cost $35 each.
Weekly demand for Dandy products in each territory is normally distributed,with a mean of mH = 3 and a standard deviation of sH = 6.Weekly demand for Popinjay products in each territory is normally distributed,with a mean of mL = 25 and a standard deviation of sL = 6.
SoxyBack maintains sufficient safety inventories in each territory to provide a CSL of 0.975 for each product.Annual holding cost at SoxyBack is 30 percent.In addition to the current approach,the management team at SoxyBack is considering two other options:
Option A: Keep the current structure but replenish inventory once a week rather than once every five weeks.
Option B: Eliminate inventories in the territories,aggregate all inventories in a finished goods warehouse at Oshkosh,and replenish the warehouse once a week.
If inventories are aggregated at Oshkosh,orders will be shipped using FedEx,which charges $7.25 + 0.77x per shipment,where x is the quantity shipped in pounds.The factory requires a one-week lead time to replenish finished-goods inventories at the Oshkosh warehouse.An average customer order is for 1 unit of Dandy and 10 units of Popinjay.
-Use Scenario 14.2 to determine the percentage increase in total annual cost of SoxyBack's current system if the cost of transportation triples while all other parameters are held constant.

Scenario 14.2 SoxyBack,a Manufacturer of Fancy Men's Socks Worn by Fashionable Gentlemen