Final answer:
To determine the optimal service level for the ABC Widget Integrated Supply Chain, one must analyze the balance between inventory levels and customer demand while considering seasonality and the risk of obsolescence. The specific optimal service level cannot be calculated without additional data about demand and costs of over- and understocking.
Step-by-step explanation:
When considering the optimal service level for an integrated supply chain, we look at the entire chain's profitability, which includes both costs and revenues at each level of the supply chain. In the scenario provided for ABC Widget, if we apply a similar logic that a worker can produce two widgets per hour, and the firm can sell each widget for a price higher than its cost, then the profit is the difference between the selling price and the cost price. However, the question does not provide enough specific data about demand, the costs of overstocking, nor the costs of understocking, which are crucial to determining the optimal service level in a supply chain with seasonal sales and obsolete stock post-season.
For a firm to maximize profit, it will need to set a service level that balances these costs, ensuring that inventory levels are optimized to meet customer demand without resulting in excess unsold widgets. The profitability at each stage – Manufacturer (M), Wholesaler (W), and Retailer (R) – are factored in, and the chain's service level will be set where the incremental cost of providing an additional unit of product equals the incremental revenue that unit brings, also considering the seasonality of sales.