Shipments of Product Q from a plant to a wholesaler are made in lots of 400. The wholesaler's average demand for Q is 150 units per week. Lead time from plant to wholesaler is 5 weeks. The wholesaler pays for the shipments when they leave the plant
The plant has proposed several new lead time and lot size options to the wholesaler (see table below). If the wholesaler's goal is to minimize total cycle plus pipeline inventories, which option should the wholesaler select?
OPTION SHIPMENT LOT SIZE PLANT-TO- WHOLESALER LEAD TIME
CURRENT 400 5
1 500 4
2 800 3
3 1,000 2
A) option #1
B) option #2
C) option #3
D) remain with the current option
C
Business
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