Michael's Mercado is a medium-sized chain of specialty grocery stores that target Latin Americans living in the southwest United States. All of the product sold in a Michael's is private label that carries the Michael's logo and the name Fresco Y Sabroso! None of Michael's suppliers are known consumer products brand names. All of the Michael's stores are relatively small and usually only carry about 1500 to 2000 unique products (stock-keeping units).

One of the chain's most popular grocery item is Fresco Y Sabroso! Guacamole Taquero. Demand is 4000 jars a month. The firm's current vendor charges $3.50 a jar. Holding cost is 30% of the per unit costs and it costs $225 to place an order for more jars of the Guacamole. A new supplier (but with same order cost) has offered to sell the same item to Michael's for $3.35 a jar if Michaels buys at least 8000 jars each order. If the firm (Michael's) wants to minimize annual inventory and product cost, what should they do?