A firm uses the order-up-to model to manage its inventory. It wants to increase

Question

A firm uses the order-up-to model to manage its inventory. It wants to increase its in-stock probability while decreasing its holding costs (i.e., reducing its average inventory). Which of the following will help to achieve this goal? (Consider each one on its own.)

(i)       Decrease the lead time

(ii)       Increase the base stock level

(iii)      Increase the average quantity on-order

Only (i)

Only (ii)

Only (iii)

(i) and (ii)

(i) and (iii)

(ii) and (ii)

Any of them will help (that is (i), (ii) or (iii))

Only (i)

Only (ii)

Only (iii)

(i) and (ii)

(i) and (iii)

(ii) and (ii)

Any of them will help (that is (i), (ii) or (iii))

Explanation / Answer

(i) and (iii) will help to achieve the goal. By increasing the average quantity on order and decreasing lead time ,holding cost will be reduced. But when we increase the base stock level the holding cost will increase.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.