fm28 9 - f Suppose it takes 2 weeks for Webster's supplier...

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Mini Case: 28 - 9 f. Suppose it takes 2 weeks for Webster's supplier to set up production, make and test the chips, and deliver them to Webster's plant. Assuming certainty in delivery times and usage, at what inventory level should Webster reorder? (assume a 52-week year, and assume that Webster orders the EOQ amount.) Answer: With an annual usage of 5,000 units, Webster's weekly usage rate is 5,000/52 96 units. If the order lead time is 2 weeks, then Webster must reorder each time its inventory reaches 2(96) = 192 units. Then, after 2 weeks, as it uses its last microchip, the new order of 500 chips arrives. g. Of course, there is uncertainty in Webster's usage rate as well as in delivery times, so the company must carry a safety stock to avoid running out of chips and having to halt production. If a 200-unit safety stock is carried, what effect would this have on total inventory costs? What is the new reorder point? What protection does the safety stock provide if usage increases, or if delivery is
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