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#41325
What is the implied "shortage cost" for a part that costs $1000 under this policy? What is it for a part that costs $20?
Question : The policy in a military base is to have 99.7% "service level" for vehicle spare parts. If the base is short of any part, it can get it from a central warehouse in one week. Assume it costs 1 % of value of the part to carry it in inventory for a week. (For example, if a part costs $200, its inventory carrying cost is $2 per week.)
What is the implied "shortage cost" for a part that costs $1000 under this policy? What is it for a part that costs $20? What are the pros and cons of this policy?
Calculates the implied shortage cost for an inventory policy to have 99.7% "service level" for vehicle spare parts.
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- 41325-inventory.xls
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