Answered step-by-stepChange Order and Lead Time In the scenario provided above, to...
Change Order and Lead Time
In the scenario provided above, to reduce the losses PepsiCo will be incurring for the rest of the year, it decided to make a change in its order to the supplier. As per the change order, PepsiCo would be receiving berries that are sufficient to produce only two million units of Pepsi Blue every month. However, changing the previously set order would incur a penalty of $20 million on PepsiCo.
The changed order would take effect immediately, i.e., the lead time is zero in this case.
Taking these factors into consideration, determine whether PepsiCo should proceed with the change order or not.
PepsiCo should proceed with the sales order, as the losses incurred in this case would be less than the losses incurred due to overstocking.
PepsiCo should not proceed with the sales order, as the losses incurred in this case would be more than the losses incurred due to overstocking.
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