The product has five colors as SKUs. The inventory stockpile at distribution center is replenished from...

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The product has five colors as SKUs. The inventory stockpile at distribution center is replenished from the supplier weekly. The supplier production lead time to Best Buy's order has a mean of 3 weeks and a standard deviation of 0.5 week, while the lead time for transportation plus customs clearance from China to the US is fairly stable at 0.5 week. Hence, the total lead time for replenishment is the sum of the supplier production lead time and the transportation plus customs clearance lead time. The demands of the five SKUs are independent, and are normally distributed with means and standard deviations: SKU Weekly Mean Red 5,000 Green 5,000 Blue 6,000 Black 6,500 White 7,000 C Weekly Standard Deviation 600 800 1,000 2,500 2,400 The distribution center set safety stock so as to achieve a service target of 98% to serve the stores, i.e., in every week, the probability of stockouts at the DC is no more than 2%. Best Buy is responsible for the 0.5 week inventory in transit, but not the inventory during the supplier lead time. Assume that the annual inventory holding cost is 30% of the inventory value. The unit value of inventory of finished product in China is $32, and the air freight from China to the US is $8 per unit. The unit value of inventory in transit to the distribution center equals the sum of the value of finished product in China, and freight, amounting to $40 each. Customs duty for each unit is $2. Hence, the value of inventory at the distribution center is $40+$2 = $42. The product has five colors as SKUs. The inventory stockpile at distribution center is replenished from the supplier weekly. The supplier production lead time to Best Buy's order has a mean of 3 weeks and a standard deviation of 0.5 week, while the lead time for transportation plus customs clearance from China to the US is fairly stable at 0.5 week. Hence, the total lead time for replenishment is the sum of the supplier production lead time and the transportation plus customs clearance lead time. The demands of the five SKUs are independent, and are normally distributed with means and standard deviations: SKU Weekly Mean Red 5,000 Green 5,000 Blue 6,000 Black 6,500 White 7,000 C Weekly Standard Deviation 600 800 1,000 2,500 2,400 The distribution center set safety stock so as to achieve a service target of 98% to serve the stores, i.e., in every week, the probability of stockouts at the DC is no more than 2%. Best Buy is responsible for the 0.5 week inventory in transit, but not the inventory during the supplier lead time. Assume that the annual inventory holding cost is 30% of the inventory value. The unit value of inventory of finished product in China is $32, and the air freight from China to the US is $8 per unit. The unit value of inventory in transit to the distribution center equals the sum of the value of finished product in China, and freight, amounting to $40 each. Customs duty for each unit is $2. Hence, the value of inventory at the distribution center is $40+$2 = $42.