The Winfield Distributing Company Has Maintained an 80% Service Level

question 122

Essay

The Winfield Distributing Company has maintained an 80% service level policy for inventory of string trimmers. Mean demand during the reorder period is 170 trimmers, and the standard deviation is 60 trimmers. The annual cost of carrying one trimmer in inventory is $6. The area sales people have recently told Winfield's management that they could expect a $400 improvement in profit (based on current figures of cost per trimmer) if the service level were increased to 99%. Is it worthwhile for Winfield to make this change?

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Definitions:

Reward Allocations

The process of distributing benefits, recognition, or compensation among members of a group or organization based on criteria such as performance, contribution, or need.

Confirmatory Bias

The tendency to search for, interpret, and remember information in a way that confirms one's preconceptions, leading to statistical errors.

Group Disagreement

The occurrence of differing opinions, views, or decisions among members within a group.

Seeking Information

The act of looking for or attempting to acquire data and facts to increase knowledge or understanding.