Ruby-Star Incorporated is considering two different vendors for one of its top-selling products which has an average weekly demand of 50 units and is valued at $75 per unit. Inbound shipments from vendor 1 will average 350 units with an average lead time (including ordering delays and transit time) of 2 weeks. Inbound shipments from vendor 2 will average 500 units with an average lead time of 1 week. Ruby-Star operates 52 weeks per year; it carries a 2-week supply of inventory as safety stock and no anticipation inventory.
a. What would be the average aggregate inventory value of this product if Ruby-Star used vendor 1 exclusively?
b. What would be the average aggregate inventory value of this product if Ruby-Star used vendor 2 exclusively?
c. How would your analysis change if average weekly demand increased to 100 units per week?