A company serves two markets in North America and has to decide on optimal order quantity and safety stock. The demand in the first market is equal to 1, 2, 3, or 4 with equal probability, whereas the demand in the second market is equal to 3, 4, or 5 with equal probability. The company has a target level of product availability of CSL=90% on both markets.

a) (1.5 points) What is the optimal order quantity for market 1? What is the optimal safety stock for market 1?

b) (1.5 points) What is the optimal order quantity for market 2? What is the optimal safety stock for market 2?

c) (0.5 points) What are optimal order quantity and safety stock for the decentralized distribution system? d) (2.5 points) What are optimal order quantity and safety stock for the centralized distribution system?