Ad$-$hoks is a major distributor that sources from hundreds of suppliers for the use of unmanned aerial vehicles $($UAVs$)$ that will shape the future of UAV

applications to serve the European market. There is a warehouse located in Munich, Germany where the daily demand is is normally distributed, with a mean

of $5,000$ and a standard deviation of $4,000$ with a CSL of $99$ percent. The company is discussing whether to use air or sea transportation from the US$.$ Air

transportation has a lead time of $4$ days and costs $1\mathrm{.}50$ per UAV. Sea transportation has a lead time of $36$ days and costs $$0\mathrm{.}50$ per UAV. Each UAV costs $$100,$

and Ad$-$hoks uses a holding cost of $20$ percent. Given the minimum lot sizes, Ad$-$hoks would order $100,000$ UAVs at a time on average, once every $20$ days if

using sea transport and $5,000$ UAVs at a time on average, daily if using air transport.

a$.$ Assuming that Ad$-$hoks follows a continuous review policy, what reorder point and safety inventory should the warehouse aim for when using sea or air

transportation? How many days of safety and cycle inventory will Ad$-$hoks carry under each policy? $($Hint: For air and sea transportation calculate rotal.

inventory and transportation cost.$)$

b$.$ Under a continuous review policy, do you recommend air or sea transportation if Ad$-$hoks does not own the inventory while it is in transit? Does your

answer change if Ad$-$hoks has ownership of the inventory while it is in transit?