Assume the following is a schedule of forecasted demands and prices over the next 5 years for item VSB1T that you are in charge of purchasing. This item comes from Italy by container and is only purchased once per year. The order is typically placed in March (at no significant charge over the vendors internet procurement site) and is in stock ready for your company to use by January of the next year. The average lead time is 33 weeks from the time it is ordered, to the time it is delivered to your loading dock. Assume 52 weeks per year. You currently have 1 pallet of VSB1T on hand.

Year VSB1T Pallet Demand VSB1T Pallet price 2022 5 3,500 2023 6 5,750 2024 5 4,900 2025 7 6,600 2026 9 3,770

You may choose to purchase pallets ahead of time to stock up for anticipated demand or use inventory that is already in stock because VSB1T is not perishable.

Due to the forecasted variability in the demand estimates above, current inventory policy requires you to keep safety stock at the end of each year to assure a 92.5% service level on average. The cost of carrying pallets for your company is estimated to be 45% of the value of the investment annually.

What level of safety stock should be kept? Round to the nearest pallet (0 decimal places)

If you were to order all of the pallets needed to meet demand for the entire 5-year horizon to be delivered in 2022, determine the following costs for 5-year period rounded to the nearest Euro (0 decimal places). Do not include commas or the in your responses.

Purchase Cost

Carrying Cost

Total Cost

If you were to order as needed on a yearly basis, determine the following costs for the 5-year period rounded to the nearest Euro (0 decimal places). Do not include commas or the in your responses.

Purchase Cost

Carrying Cost

Total Cost

Now formulate and solve a Linear Program that minimizes Total Cost over the 5-year period. List the pallets to be delivered for each of the 5 years. Round to the nearest pallet (0 decimal places)

2022

2023

2024

2025

2026

Report the following costs for the optimal purchasing schedule above. Round to the nearest Euro (0 decimal places). Do not include commas or the in your responses.

Purchase Cost

Carrying Cost

Total Cost