AWS manufactures a product used in the Telecom industry. Adam Dakin, the company's purchasing manager, is currently revising the inventory ordering policy for MJ21, one of the chemicals used in the production process. The chemical is purchased in 10-kilogram case for $89 each and the firm uses 8 640 cases per year. The accountant of the company has shared the following details with Adam:

• Estimated incremental costs of ordering and receiving MJ21 are $195 per order
• The annual cost of storing MJ21 is $6.5 per case
• currently, the order size is 340 units
• The lead time required to receive an order of MJ21 is one month.

Required:

1. What is the total annual cost of ordering and storing MJ21 under the current policy?
2. Use the EOQ formula to determine the optimal order quantity for MJ21.
3. How many orders will be placed per year based on the EOQ?
4. If Adam decides to order as per EOQ, how much the company will save in inventory cost per year? Support your answer with calculations.
5. Assuming stable usage of MJ21 each month, determine the reorder point for MJ21
6. Suppose that monthly usage of MJ21 fluctuates between 600 and 800 cases, although annual demand remains constant at 8 640 cases. What level of safety stock should the materials and parts manager keep on hand for MJ21? What is the new reorder point for the chemical?
7. Suppose Adam wants to introduce a contemporary inventory policy - Just in Time. What are the steps Allen must take to implement the new policy? Explain what obstacles Allen may face during the transition period and how to manage these obstacles?