The Cleanco Chemical Company

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The Cleanco Chemical Company sells cleaning compounds (dishwashing powders, floorcleaners, nonpetroleum lubricants) in a keenly competitive environment to restaurants, hospitalsand schools. Delivery time on orders determines whether a sale can be made. The distributionsystem can be designed to provide different average levels of delivery time through the numberand location of warehousing points, stocking levels and order processing procedures. Thepsychical distribution manager has made the following estimates of how service affects sales andthe cost of providing service levels:A. What level of service should the company offer?B. What effect would competition likely have on the service level decision?

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