$2.(50$ points$)$ You are the COO of a company that produces an industrial product for the

US market. You have one factory and two distribution centers $($East and West$).$ All

customers are served from the distribution centers, that is$,$ none are served directly

from the factory. The average and standard deviation of daily demand for both

distribution centers are given in a table below, as are the per$-$unit costs and time for

transporting a unit from the factory to a distribution center. Demand at each

distribution center is not correlated over time or with the demand at the other

distribution center. You are in a competitive industry in which customers value high

order fill rates. As such, youve made a decision that the distribution centers hold safety

stock and must provide a $99\%$ service level.

The product is produced at the factory by assembling three components $($A$,$ B$,$ and C$).$

The product requires two units of component A and one each of components B and C$.$

Each component is sourced from a different supplier. Component costs and lead times

are given in a table below. The component cost includes the cost of transporting the

component to your factory. Component suppliers are powerful enough to dictate that

your company must pay for the order $($including the transportation cost$)$ as soon as the

order is placed $($Lead time in Pipeline box should be checked in SIP$).$ the current supply chain configuration, the factory holds finished product safety stock

but does not hold safety stock for any component.

You are considering switching to an innovative assembly process and system that would

dramatically cut the assembly time from $25$ days to $3$ days but would increase the perunit

assembly cost from $$350$ to $$420.$ Switching to this new system would also allow

you to revisit your current safety stock positioning strategy at the factory $($however the

distribution centers must continue to hold safety stock$).$

How much higher or lower would your annual cost of goods sold plus holding cost be if

you switched to the new assembly system? Assume that your annual holding cost rate is

$30\%$ at all points in the network.

You should include in your submission

$($i$)$ a picture of the existing supply chain, and

$($ii$)$ a picture of your proposed supply chain, as created in the SIP software.

Distribution Center Data

Distribution

Center $($DC$)$

Average Daily

Demand

Std$.$ Deviation

of Demand

Per$-$unit Cost $($$$)$ to

ship from Factory to

DC

Time $($days$)$ to ship

from Factory to DC

East $251042$

West $20821$

Component Procurement Data

Component Per$-$unit Cost $($$$)$ Lead Time $($d