A Japanese auto parts manufacturer currently has a local factory and a warehouse to

serve its customers in Japan. In order to reduce cost and maintain profitability, the

company is considering outsourcing production to a low$-$cost country while keeping

its warehouse in Japan to serve the customers.

By reviewing historical sales data, the company has found that the weekly demand for

the part follows a normal distribution with mean $500$ units and standard deviation of

$100$ units. The company adopts a $(Q,R)$ policy for inventory control in the warehouse

and sets the target in$-$stock rate at $98\%.$ The annual inventory holding cost rate is $25\%.$

After some screening, the company has narrowed down to China and Mexico the two

candidate locations for outsourcing. Table $1$ summarizes the key relevant factors

regarding the two alternatives.

Table $1$ Potential outsourcing locations

$($a$)$ Determine the order quantity find reorder point for the warehouse if the production

is moved to China or Mexico, respectively.

$($b$)$ From a total cost perspective, select the outsourcing location between China and

Mexico. Justify your recommendation.

$($c$)$ Besides total landed cost, what other factors should companies consider when making

the decision to take manufacturing off$-$shore? Name and discuss at least two factors.