As before, convince yourself that if review is continuous, and replenishment was instantaneous (lead time is zero), then a simple, trivial policy is adequate. Now assess what would be the effect on R and/or Q if the lead time increases. Try to see if you can deduce the nature of the cost curve with respect to R (for a fixed Q), which could arise because of transport constraints (say a truck load). Separately, argue what would happen if the fixed cost for ordering is zero.

(II) If the demand at a warehouse is the aggregated demand from several retailers and is observed to be as given in Section 1, over 30 weeks. How much inventory should you hold at the warehouse to ensure that you (almost) never fall short?