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The clothing retailer Zara sells fashion goods, which have a relatively shorter shelf-life and have to be discounted heavily if they go out of style. Typically a clothing retailer might have a relatively higher service level, but Zara effectively uses the possibility of a shortage of an item to lure customers into the store more often - Zara's customers visit the store twice or three times as often as at competitive retailers. Why does Zara hold relatively lesser inventory in its stores as compared to competitors? Zara seems to have a lower Cu and lower Co. Zara seems to have a higher Cu and higher Co. Zara seems to have a lower Cu and higher Co. o Zara seems to have a higher Cu and lower Co.

The clothing retailer Zara sells fashion goods, which have a relatively shorter shelf-life and have to be discounted heavily if they go out of style. Typically a clothing retailer might have a relatively higher service level, but Zara effectively uses the possibility of a shortage of an item to lure customers into the store more often - Zara's customers visit the store twice or three times as often as at competitive retailers. Why does Zara hold relatively lesser inventory in its stores as compared to competitors? Zara seems to have a lower Cu and lower Co. Zara seems to have a higher Cu and higher Co. Zara seems to have a lower Cu and higher Co. o Zara seems to have a higher Cu and lower Co.

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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The clothing retailer Zara sells fashion goods, which have a relatively shorter shelf-life and have to be discounted heavily if they go out of style. Typically a clothing retailer might have a relatively higher service level, but Zara effectively uses the possibility of a shortage of an item to lure customers into the store more often - Zara's customers visit the store twice or three times as often as at competitive retailers. Why does Zara hold relatively lesser inventory in its stores as compared to competitors? Zara seems to have a lower Cu and lower Co. Zara seems to have a higher Cu and higher Co. Zara seems to have a lower Cu and higher Co. Zara seems to have a higher Cu and lower Co.
Transcribed Image Text:The clothing retailer Zara sells fashion goods, which have a relatively shorter shelf-life and have to be discounted heavily if they go out of style. Typically a clothing retailer might have a relatively higher service level, but Zara effectively uses the possibility of a shortage of an item to lure customers into the store more often - Zara's customers visit the store twice or three times as often as at competitive retailers. Why does Zara hold relatively lesser inventory in its stores as compared to competitors? Zara seems to have a lower Cu and lower Co. Zara seems to have a higher Cu and higher Co. Zara seems to have a lower Cu and higher Co. Zara seems to have a higher Cu and lower Co.
Let's say you are ordering food for your wedding reception, and you sent out 150 invitations. Everyone RSVP'd, with140 people saying they would attend. You know however that not everyone who RSVP'd will actually show up; there are always, always, always some no-shows (at least from the question-writers experience). Thus you expect to need 100 meals. But just to be safe, you plan to order 110 meals, estimating this is a 90% service level (accepting a 10% probability you'll run out). You discuss this with your fiance who is adamant about increasing your service level to 99 %. What is the cost of underage implied by your fiance? Assume that a meal costs $30 with salvage value of $5 (you have a large freezer and enjoy leftovers). $ 2500 $ 3000 O $ 300 O$3
Transcribed Image Text:Let's say you are ordering food for your wedding reception, and you sent out 150 invitations. Everyone RSVP'd, with140 people saying they would attend. You know however that not everyone who RSVP'd will actually show up; there are always, always, always some no-shows (at least from the question-writers experience). Thus you expect to need 100 meals. But just to be safe, you plan to order 110 meals, estimating this is a 90% service level (accepting a 10% probability you'll run out). You discuss this with your fiance who is adamant about increasing your service level to 99 %. What is the cost of underage implied by your fiance? Assume that a meal costs $30 with salvage value of $5 (you have a large freezer and enjoy leftovers). $ 2500 $ 3000 O $ 300 O$3
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