3. The Hazy Company maintains a West Coast distribution center (DC), which is supplied from the plant warehouse in the Midwest. It takes exactly one week to ship to the distribution center from the Midwest.

One of its products has an ordering cost of $10 per order, inventory carrying cost of $1 per unit per week, and average weekly demand at the DC of five units (although it has fluctuated uniformly between 0 and 10 units per week in actuality). Over the years, the product’s safety stock level has varied. There are currently (early Monday morning) nine units in inventory at the DC. The company is willing to risk a probability of stocking out of 0.10 in any order cycle. (You can ignore in-transit inventory for this problem.)

a. If the company uses an economic shipment (order) quantity, reorder point system, what should the order quantity and reorder point be?

b. If the company adapted DRP logic to this DC supply situation and decided to ship only on Mondays (to consolidate shipments), what would you suggest for the planned shipping pattern over the next 10 weeks? (Use a safety stock level of two units.)

c. If actual demand for the upcoming week were six units, what would the new shipping pattern be? (Assume any planned shipments in the current week are released.)