Back groundWith the outbreak of COVID-19, the world is experiencing a severe shortage of ventilators for treating patients in hospitals. DBS is a manufacturer of ventilators in Melbourne. It uses a special component to make its top-of-the range ventilators. DBS requires an average of 24,000 units of this special component every year in its manufacturing process. The major supplier of the special component that DBS has been dealing with, is a preferred supply chain partner who charges a price per unit of $3000 for the component. Each order costs $500 to process. Because of limited storage space, the operations manager wants to factor in inventory holding cost at 13.75% of the unit cost. You have been asked to:

(1) Determine the economic order quantity (EOQ) and total annual cost if ordering the EOQ number of units. How much will DBS be able to save by adopting the EOQ versus a current Q = 400? What is the reorder point with safety stock if lead time is 21 days, standard deviation of weekly demand is 3.75 and on an average DBS operates for a total of 48 weeks every year? Assume a z value of 1.645 corresponding to the desired service level as specified in DBS' operating procedures. What would the reorder point be without safety stock and how would you interpret each of the two reorder points?