Dual Sourcing

Assume that the demand in each period is normally distributed with the average of 80 units and the standard deviation of 20 units. What is the optimal quantity to order from Mexico and China for the next 44 period and examine performance of the tailored base-surge policy?

- Sales unit price = $10,000/unit - Mexico unit sourcing cost = $8,000/unit - lead time 1 week - China unit sourcing cost = $7,250/unit - lead time 4 weeks - Cash earns 1% per period; debt costs 1% per period

- Periods 1 to 4 allow you to order supplies and fill the pipeline before demand and sales starts in period 5