Question

Haley photocopying purchases a paper from an out-of-state vendor. Average weekly demand for paper is 150 cartons per week for which Haley pays $15 per carton. In bound shipments from the vendor average 1000 cartoons with an average lead time of 3 weeks. Haley operates 52 weeks per year; it carries a 4-week supply of inventory as safety stock and no anticipation inventory. The vendor has recently announced that they will be building a faculty near Haley Photocopying that will reduce lead time to one week. Further, they will be able to reduce shipments to 200 cartons. Haley believes that they will be able to reduce safety stock to a 1-week supply. What impact will these changes make to Haley’s average inventory level and its average aggregated inventory value?

Answer 1

The changes announced by the vendor will result in a decrease in Haley Photocopying's average inventory level to 77 cartons and the average aggregated inventory value to $1155.

Step-by-step explanation:

Haley Photocopying currently purchases paper from an out-of-state vendor. The average weekly demand for paper is 150 cartons, and Haley pays $15 per carton. The inbound shipments from the vendor have an average lead time of 3 weeks and an average quantity of 1000 cartons. Haley operates for 52 weeks per year and maintains a 4-week supply of inventory as safety stock. Under these conditions, Haley's average inventory level is 204 cartons, and the average aggregated inventory value is $3060.

However, with the changes announced by the vendor, including a new facility near Haley Photocopying that will reduce lead time to one week and shipments to 200 cartons, Haley anticipates reducing the safety stock to a 1-week supply. These changes will result in a decrease in the average inventory level to 77 cartons and a decrease in the average aggregated inventory value to $1155.