Use the following to answer the questions below.
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.Lead time from plant to wholesaler is 4 weeks.The wholesaler pays for the shipments when they leave the plant.
-Refer to the instruction above.If the plant reduces its lead time from 4 to 2 weeks and keeps its 600 unit lot size,what is the wholesaler's new total cycle plus pipeline inventories?

Question

Quizplus · Accepted Answer

Total cycle time = lead time + lot size/average demand
Pipeline inventory = lead time x average demand
Before reducing lead time:
Total cycle time = 4 + 600/100 = 10 weeks
Pipeline inventory = 4 x 100 = 400 units
After reducing lead time:
Total cycle time = 2 + 600/100 = 8 weeks
Pipeline inventory = 2 x 100 = 200 units
New total cycle plus pipeline inventories = 600 + 200 = 800 units
Therefore, the answer is B) 500 units.

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