Why should replenishment lead time be considered in supplier selection decisions?
What will be an ideal response?
Answer: As the replenishment lead time from a supplier grows, the amount of safety inventory that needs to be held by the buyer also grows proportional to the square root of the replenishment lead time. Lead time performance by a supplier can directly be translated into the required safety inventory. Scoring the performance of suppliers in terms of replenishment lead time thus allows the firm to evaluate the impact each supplier has on the cost of holding safety inventory.
You might also like to view...
What flat-file data management problems are solved as a result of using the database concept?
Which of the following ordinarily would be treated as a revenue expenditure rather than a capital expenditure?
a. Repair and maintenance on buildings b. The replacement of a major component of a building c. An addition to an existing building d. Rearrangement costs that are identifiable, material, and are expected to provide discernable future benefits
To which of the following groups does a landowner owe the highest degree of care?
A) Trespasser B) Licensee C) Invitee D) None of the above
One of the easiest capital budgeting methods to understand is
a. net present value. b. the internal rate of return. c. the payback method. d. the strategic analysis approach.