Annual Demand(#units) Inventory Costs CH-4 engine oil Average S.D. Holding $/unit/year Stock-out $/unit 1-litre cans 1,000,000 13,000 1 2 Lead time = 1 month 5-litre drums 200,000 7,500 5 8 Ordering cost $5000 5-litre cans 300,000 5,000 5 10 1. Ignoring demand uncertainty, determine the Economic Order Quantity and reorder level for each of the three types of CH-4 engine oil products. What are the total inventory costs under this constant demand scenario? 2. Now consider uncertain demand Determine the optimal order quantity and reorder level How do these compare to (1) and why? Compare the new expected total inventory costs under the uncertain demand case with the total inventory costs in (1). How and why do they differ? The central warehouse in Belgium is thinking "out of the box". In order to reduce its overall inventory costs, it is considering storing engine oil in bulk and transferring the oil to cans or drums only after a retailer's order is received. Annual Demand (#units) Inventory Costs CH-4 engine oil Average Total (litres) 3,500,000 Holding S.D. $/unit/year Stock-out $/unit 57,879 1 2 3. Why might this policy reduce inventory costs and what other costs or benefits might it incur as a consequence?