2. Haley Photccopying purchases paper from an out-of state vendor. Average weekl

Question

2. Haley Photccopying purchases paper from an out-of state vendor. Average weekly demand for paper is 130 cartons per week for which Haley pays S30 per carton Inbound shipments from the vendor average 750 cartons 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 facility 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 aggregate inventory value? The changes decrease Haley's average aggregate inventory level by cartons. (Enter your response as a whole number.) The changes decrease Haley's average aggregate inventory value by S (Enter your response as a whole number)

Explanation / Answer

Current safety stock level = 130 cartons per week * 4 weeks = 520 cartons

Cycle stock = Inbound shipment / 2 = 750/2 = 375

Current average inventory level = 520+375 = 895 cartons

Current average inventory value = 895*30 = $ 26,850

New safety stock = 130*1 = 130 cartons

Cycle stock = 200/2 = 100 cartons

Average inventory level = 130+100 = 230 cartons

Average inventory value = 230*30 = $ 6,900

The changes decrease Haley's average aggregate inventory level by = 895-230 = 665 cartons

The changes decrease Haley's average aggregate inventory value by = 665*30 = $ 19,950

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