1. A North Face retail store in Chicago sells 500 monthly jackets. Each jacket costs the store $100 and the company has an annual holding cost of 25 percent. The fixed cost of a replenishment order (including transportation) is $100. The store currently places a replenishment order every month for 500 jackets. What is the annual holding and ordering cost? On average, how long does a jacket spend in inventory? If the retail store wants to minimize ordering and holding costs, what order size do you recommend? How much would the optimal order reduce holding and ordering costs relative to the current policy?

2. Amazon sells 10,000 Lenovo PCs every month. Each PC costs $500 and Amazon has a holding cost of 20 percent. For what fixed cost per order would an order size of 10,000 units be optimal? For what fixed cost per order would an order size of 2,500 units be optimal?

3. An electronics company has two contract manufacturers in Asia: Foxconn assembles its tablets and smartphones and Flextronics assembles its laptops. The monthly demand for tablets and smartphones is 10,000 units, whereas that for laptops is 4,000. Tablets cost the company $100, laptops cost $400, and the company has a holding cost of 25 percent. Currently, the company has to place separate orders with Foxconn and Flextronics and receives separate shipments. The fixed cost of each shipment is $10,000. What is the optimal order size and order frequency with each of Foxconn and Flextronics? The company is thinking of combining all assembly with the same contract manufacturer. This will allow for a single shipment of all products from Asia. If the fixed cost of each shipment remains $10,000, what is the optimal order frequency and order size from the combined orders? How much reduction in cycle inventory can the company expect as a result of combining orders and shipments?