\fAirXhaust has been shipping orders in lot sizes of 200. The time it took orders to arrive from AirXhaust to Pytec has been, on average, 2 weeks. Currently, we are at the end of week 21. We have zero on hand inventory and 11 units backordered. There is a scheduled receipt of 150 units (meaning 150 units have been ordered but was not received yet). The supplier of SWS108 wing tip light is FlySupport Corp, located in Montana. Below is the data on the observed demand for this part for weeks 11 to 21 (We don't have observed demand data for this part for weeks 1-10 since this is a new product that is introduced in week 11): Week Actual Demand 11 18 12 33 13 53 14 54 15 51 16 53 17 50 53 19 54 20 49 21 52 Currently, at the end of week 21, we have 324 on hand inventory (no backorders or scheduled receipts). Lot size for orders coming from FlySupport is currently 1,200, and lead time has been 2 week on average. Pytec has been charging the plane manufacturer $14.99/item as the wholesale price for CSN120 exhaust system and $10.99/item as the wholesale price for SWS108 wing tip light. The profit margin for Pytec is 35% (of the wholesale price) for the CSN120 exhaust system and 45% (of the wholesale price) for the SWS108 wing tip light. Based on past data, holding cost per item for any part is at 24% of the item's value. This holding cost includes both the physical cost of carrying and storing the parts, and the opportunity cost of investing funds in inventory. Crowley decides that the other expenditures for the warehouse, which was built for $1.5 million, such as utilities and maintenance, can be ignored since they will not have an impact on the inventory policy employed.P'tI'TEC ENGINEERED MATERIAIS, INC Pytec Engineered Materials, Inc. is a wholesale distributor of plane parts that is a supplierto one of the largest plane manufacturers in the world. Two former airplane manufacturing technicians, Matt arias and Dave Floyd. The company started out at Briggs\" family house's garage. Over the nor-rt 1|] years, their business grew. With the growth, the company moved from the garage to an old packaging warehouse in Everett Larger square footage of the warehouse gave Briggs and Floyd the opportunityto store more inventory, and, thus, dtey were able to offer a larger portfolio of plane pans. Due to the growth of the plane sales of their customer, the large plane manufacturer, and due to their expanded portfolio of plane parts, Pytec's started experiencing tremendousgrowth. Twenty years later, Pytec was the highest volume independent supplier of plane parts in PNW. Receody, Pytec relocated to a new location off l-5 in Mukilteo area. Their mw location is composed of offices and multiple warehous. The warehouses have the capacity to hold more than 1m,m ft2 of materials. The capacity utilization of the new warehouses had increased from 55%. to almost 95%, even though only a limited number the new product: were introduced by Pytec. However, due to unexpected developments in the airplane market, the sales growth for Pytec has started to flatten. With the aim of improving things, Briggs and Floyd hired a manager to help them with decision ma king. Laura Crowley was the rst decision-maker to join the company in many yea rs. [in her first day as the materials manager for Pytec, which was a new position created for her, Laura Crowley reoeived the status report: on inventory and orders shipped. The report included a note from Tom Finley, the purchasing manager: "These are the reports that include data on inventory and performance of customer servioe. 5i nce we did a complete physical inventory count at the end of last week, we are condent that the inventory information is accurate. For some of the data,lr information you requested, we have been informed that no standardized reoord keeping had been utilized. We would appreciate it if one of the tasks you plan to work on includes creating record keeping structures for those areas. Looking forward to working together!" From the reports and the note, Crowley understood that aggregate inventory information was not available. In order start her analysis, Crowley identied 1m] random items and started putting together data on inventory and customer service for those items. She was hoping to achieve a high-level understanding of the inventory dynamics. Through her analysis, she ooncluded that there were semral issues with the way operations were run at Fytec. Inventory was not at the right place. Even though average onhand inventory seemed be ED days' worth, they were lagging in customer service. They were not able to fulll all of the customer's order from onh and inventory and had to backorder them. This led to a demand loss of 10% due to the customer deciding to go with a competitor to supplytheir parts on those insta nc. Crovdey knew that experiencing stockouts could be very oostly for the company, especially in the long term, so she decided that they should target a cycle servioe level of am