A retailer is open every day (except for 10 holidays) each year, selling OSU T-shirts, at a rate of about 135 units per week and D = 75 units per week (sports schedule dependent). Your supplier is in Asia with a long lead time that averages 10 wks with a LT = 2 wks with continueing COVID issues, shipping is a flat rate of $2.50/unit regardless of order size, and you take ownership when the sweatshirts are loaded on the ship (freight is FOB). The holding rate is 27% per year and there is a fixed replenishment cost of $2500 per order regardless of order size, for this $25 item. A 90% service level supports customers moderate tolerance of stock outs.

question 1

On average, how many units and what is the value of in-transit inventory at the current lead- time? What is the value and number of units in-transit if lead time was reduced to 6 wks with a 1 wk standard deviation? On average, how much less inventory will be in-transit and what is the savings of in-transit holding costs?