ASSIGNMENT JungleBooks.com Junglebooks needs to manage inventory strategically to compete effectively. Ben Barnesworth is considering decentralizing from a single centralized distribution center (CDC) to six smaller decentralized distribution centers (DCs). With a strategic decision of this importance, Ben hopes to be assured of its profitability. In this assignment you will consider the inventory implications of the decentralization decision. You will likely need to make several assumptions in the process of performing calculations, indicate and defend your assumptions as required. 1. First consider the decentralized analysis. Estimate the optimal decisions for a (Q,R) inventory policy for each of the four SKU types detailed in the case (page 7) for each proposed DC. The data is reproduced here for ease of reference: Soft Cover I Soft Cover II HardCover I HardCover II Number of Titles 50,000 70,000 10,000 20,000 Unit Cost $2.00 $2.50 $10.00 $10.00 Lead Time 2 3 3 2 Mean Demand 25 50 100 10 Std Dev 5 50 20 12 Fed Ex Charges $6.00 $6.00 $11.00 $11.00 The demand at each DC distributed according to the above table; e.g. each of the six DCs sees a mean demand of 25 units for each title of SKU type SoftCover I. Calculate the optimal strategy (Q,R) for each decentralized DC. Estimate the annual inventory holding and ordering costs across all DC's for managing the inventory of SKU type SoftCover I. 2. Now consider a centralized analysis (their current system) using the same service level derived for the decentralized system. Determine the optimal decisions of a (Q,R) inventory policy SKU type SoftCover I for a centralized DC. Estimate the annual inventory holding plus ordering costs for managing inventory of SKU type SoftCover I. 3. Estimate the difference in annual expenses between the centralized and decentralized systems for managing inventory of SKU type SoftCover I. 4. In what ways is this analysis approximate? In what ways does it exaggerate or underestimate the differences in inventory costs between the current centralized system and the proposed decentralized system?