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c)
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Numerical problem (JIT - Lean system)
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(6 points)
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A US firm procures heavy machinery from overseas. The weekly average demand of the products is
20 items. The demand variation (σd) is 2.5 items. The firm wants to maintain a 95% customer service level (z = 1.96). The firm needs to find the best suppliers from three supply companies to comply with JIT-lean perspective in order to keep inventory at the minimum.
§ Supplier A (South Asia):
Supplier A: Average lead time (LA) = 6 weeks, Lead time variation (σLA) = 3 weeks
§ Supplier B (Europe):
Supplier B: Average lead time (LB) = 4 weeks, Lead time variation (σLB) = 2 weeks
§ Supplier C (South America):
Supplier C: Average lead time (LC) = 3 weeks, Lead time variation (σLC) = 4 weeks