ABC obtains scanners from its European manufacturers to serve the UK market. Weekly demand at the UK store is normally distributed with a mean $($mu $)$ of $140$ units and a standard deviation $($sigma $)$ of $10$ units. ABC aims for a service level $($alpha $)$ of $93\%.$ ABC is debating whether to use Sea or Train transportation mode. Sea mode results in a lead time of $4$ weeks and costs $$8$ per unit. Train mode results in a lead time of $2$ weeks and costs $$16$ per unit. Each scanner costs $$500,$ and ABC uses a holding cost of $20\%$ per year. Given the minimum lot sizes $($Q$),$ ABC would order $3,000$ scanners each time if using Sea mode, and $300$ scanners at a time if using Train mode. Assume that $1$ year $=52$ weeks, and $1$ week $=7$ days. $($Note: Round up your solutions to the nearest integer$)[28\%]$$($a$)$ If ABC follows a continuous review policy, what reorder point $($R$)$ and safety inventory should ABC aim for when using $($i$)$ Sea, or $($ii$)$ Train? $[8\%]$$($b$)$ Which transportation mode $($Sea or Train$)$ would you recommend if ABC takes ownership of the in$-$transit inventory? $($Hints: Compute the annual sum of total transportation cost and total inventory cost for each mode$)[16\%]$$($c$)$ If ABC does not own the in$-$transit inventory, would you change your choice in part $($b$)$ and why? $[4\%]$

Answer rating: 100% (QA)

a i For Sea transportation mode Reorder Point R Demand per week x Lead Time in weeks Safety Stock R ... View the full answer