What is the customer service level?

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Presentation transcript:

What is the customer service level? Problem 7.1 R = 400/week Q = 4(400) = 1600 L = 1 ROP = 500 R = N(400, 125) The table will give this probability Page 319: Normal table z Second digit after decimal Given positive z Up to the first digit after decimal Probability

Increasing service level increases the required safety inventory more than proportionately. The process of selecting service level and safety inventory level is an important strategic decision. A firm may choose to provide high quality service in terms of product availability, or it may choose to be a low cost supplier by holding down inventory costs. Therefore, the firm decide where to position itself in the two dimensional space of quality-cost. The trade-off between quality and cost is shown in the graph This graph is a perfect example to show how a strategic position could be operationalized.