The Tesla Model 3 is an electric four-door fastback sedan developed by Tesla. Its the world's best-selling electric car in history, with more than 500,000 units delivered. Tesla decided to build regional warehouses where some versions of Model 3 would be modified to suit a particular individual and transported to vendors on demand. 

Modification and transportation on demand will increase the cost of producing and shipping per car by $ 100. Each car costs $ 20,000 and Tesla's holding cost is 20%. Cars at the vendorship belong to Tesla for the first 90 days. Therefore, for all practical purposes, Tesla owns all inventory, whether at the vendorship or in the regional warehouse. Think of a region with 5 large vendors and 30 small vendors. Tesla divided the versions into two groups - Long Range versions and Performance versions. There are two vendor types:

 

The goal is to provide a 95 percent service level using a continuous review policy. Renewal times for both vendors and regional warehouses are four weeks. Customization and shipping from a regional warehouse to the vendor can be done in one day and ignored. Assume demand is independent between all vendors. 

a. How much safety inventory of a Long Range version is required at a large or small vendor? 

b. What is the safety inventory required if inventory for the Long Range version (for both large and small vendors) is centralized at the regional warehouse by Tesla? 

C. What is the safety inventory required if inventory for the Long Range version at small vendors is centralized at the regional warehouse but that for large vendors is decentralized?

d. Given the additional customization and transportation cost, which structure do you recommend for the Long Range version? Hint: Find the TC for (a), (b), and (c).

L S Model 3 Long Range versions Mean Standart Deviation 18 6 48 13 Model 3 Performance versions Standart Deviation 5 Mean 8 2 2