Demand for vitamins is 15,000 bottles per month. Walgreens (WG) incurs a fixed order placement, transportation, and receiving cost of $125 each time it places an order for vitamins with the manufacturer. WG incurs a holding cost of 20 percent. The manufacturer charges $4 for each bottle of vitamins purchased.

a) Evaluate the optimal lot size for WG. What is the annual ordering and holding cost incurred by WG?

b) Each time WG places an order, the manufacturer has to process, pack, and ship the order. The manufacturer has a line packing bottles at a steady rate that matches demand. The manufacturer incurs a fixed-order filling cost of $250, production cost of $2 per bottle, and a holding cost of 20 percent. What is the annual ordering and holding cost incurred by the manufacturer as a result of WGs ordering policy?

c) What is the lot size that minimizes total supply chain cost? (coordinated solution)

d) Design a suitable quantity discount that gets WG to order in lots size realized under coordinated solution.