Question: A Nike import distribution center ( hereafter refers to as IDC ) supplies a certain product to a Nike online fulfillment center ( hereafter referred

A Nike import distribution center (hereafter refers to as IDC) supplies a certain product to a Nike online fulfillment center (hereafter referred to as OFC). The manager at OFC estimates that the demand for this product follows a normal distribution with an average demand of 100 per day and standard deviation of 20 per day. The manager also estimates that for a 1% increase (or decrease) in service level (during the lead time), the average annual sales will increase (or decrease) by 0.1%. The rest of the information regarding this product are listed below:
Average daily demand: 100 units per day
Standard deviation of demand: 20 units per day
Cost of goods sold at OFC: $100 per unit.
Product margin: $10 per unit.
Inventory carrying cost percentage: 30% for all inventory (either at IDC, OFC, or in-transit).
Order cost at OFC: $100 per order.
Current lead time from IDC to OFC: 5 days
Assuming the manager in OFC uses a re-order point inventory control policy.The IDC orders the product from an Asian manufacturer with a lead time of 15 days. To minimize its shipping cost, IDC orders 5,000 units each time. Assuming OFC keeps the same order behavior (that is, orders 4,000 units each time from IDC and maintains a service level of 98%). On the other hand, IDC needs to maintain a service level of 99% during the lead time, what is the average inventory level at IDC alone?

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