An oil distribution depot supplies customers by road tanker. The depot itself is supplied by a unit train with 24 cars, each with a capacity of 75 tons. At the depot, three different products are stored in eight 1,000-ton tanks. At present, three tanks are used for product A, three tanks for product B, and two tanks for product C. Analysis of demand records shows that the average weekly demand for product A is 600 tons with a standard deviation 400 tons, average weekly demand for product B is 500 tons with a standard deviation 300 tons, and average weekly demand for product C is 400 tons with a standard deviation 200 tons.

Any seasonal effects can be ignored. The stock level of each product is reported by the depot to the refinery every Monday morning. The distribution office then has to decide whether to replenish the depot the following Friday and, if so, how many cars of the train should be filled with each product. The cost of operating the train is not reduced if any cars are empty and is approximately $3,000 per trip. If a product runs out at the depot, then the road tankers have to be diverted from that depot to another depot at considerably higher cost.

a. How does the limited capacity tankage at the depot affect the applicability of standard inventory control models?

b. Are there any other features of the problem that make standard inventory control models difficult to apply?

c. Without doing any detailed numerical calculations, indicate the type of inventory control guidelines that you could propose for the distribution office.

d. Briefly indicate what other (if any) types of data you would need. Also, what type of solution procedure (for finding precise values of control parameters within the general control guidelines of part

c) do you think would be needed? LOP52