13 May SHOULD DENTON JOB SHOP SWITCH ORDER TO THIS NEW DISTRIBUTOR?
Denton Job Shop buys two parts (Tedwigs and Widgets) for use in its production system from two different suppliers. The parts are needed throughout the entire 52-week year. Tedwigs are used at a relatively constant rate and are ordered whenever the remaining quantity drops to the reorder level. Widgets are ordered from a supplier who stops by every three weeks. Data for both products are as follows:TedwigWidgetAnnual Demand10,0005,000Holding cost (% of item cost)20%20%Set up or order cost$150$25Lead time4 weeks1 weekSafety stock55 units5 unitsItem cost$10$2a) What is the inventory control system for Tedwigs? That is, what is the reorder quantity and what is the reorder point?b) What is the inventory control system for Widgets?c) On average, how much is Denton Job Shop paying annually in holding costs and ordering costs for these supplies?d) A distributor has offered to supply both parts at the same item cost but with a significant reduction in order cost. However, Denton must coordinate the replenishment of these supplies to obtain savings on the delivery. Denton must place an order for both parts every two months to benefit from a total order cost of 140 (for delivery of both Tedwigs and Widgets). Should Denton Job Shop switch order to this new distributor? Please show all calculations supporting your answer.
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