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AquaFlow Inc., a prominent water heater manufacturer, is faced with a critical decision regarding the produc - tion location for their latest water heater models,
AquaFlow Inc., a prominent water heater manufacturer, is faced with a critical decision regarding the production location for their latest water heater models, domestically or internationally. Their production facility isdesigned to manufacture water heaters every week, with a standard deviation of Given the high laborcosts, the CEO has set a challenge for the COO to achieve a Type service level using a basestockordering policy with weekly orders. Domestic production takes weeks, while international production takes weeks with a standard deviation of weeks.Domestic Production:a Determine TIP, cycle stock, pipeline stock, and safety stock for production.b Calculate the number of inventory turns each year.c Using the TIP chosen in part a what is the Type service level?d What is the TIP and safety stock that would correspond to a Type service level?International Productione. Determine TIP, cycle stock, pipeline stock, and safety stock.f Calculate the number of inventory turns each year.Assume that the unit production cost for domestic production is $ and unit transportation cost is$ For the international option, the production cost is $ and unit transportation cost is $g Assuming that the quality of internationally and domestically produced goods are the same, is it financially reasonable for AquaFlows to purchase the new water heaters domestically?h If not, what cost per unit do they need to be at for production in order to match international costs? Orwhat cost per unit internationally do foreign suppliers need to be at for production in order to be competitive?
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