Botafogo Circuits imports some electronic components and redistributes them in the Brazilian market. This includes some difficulties, such as delivery uncertainty. Using regular air freight, shipping and handling costs $250 per item ordered, but the delivery may take anywhere from 10 to 30 days. Because of this uncertainty, the manager contacted a number of carriers looking for more reliable alternatives. Two distinct bids stood up:

a. An express

b. A regular shipper would pick orders every 15th of the month and deliver them on the 15th of the next month, for a cost of $200 per order plus $0.50 per unit, for any number of items ordered.
Demand for these items can be approximated by a Normal distribution. The following table shows the mean and standard deviation of the yearly demand, as well as the unit costs for some of these items:
Demand Di vi σi,1 Item i (Packs/Year) ($/Pack) (Packs)
XRL-10 1,200 40.00 860 XRL-12 1,250 35.00 500 XRL-15 1,800 22.00 120 XRL-20 700 17.00 400 In its internal accounts, the manager considers a fractional charge of 0.50 for each unit short, and an inventory carrying charge of 0.30 $/$/year. Describe the inventory policy that should be used with each of the transportation alternatives. Which alternative should the firm use?