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There is an aircraft carrier that is cheap. They need 40,000 airplane tires per year (historically). These tires are typically expensive because they must be of the highest quality. The cost of these tires is $2,250 each. It costs this company 30% of the unit cost per year.

The current process of obtaining orders is $80,000 each time.

Question:

1. Let's assume the demand is steady throughout the year (365 days). Lead time is 11 days for getting the tires. At what inventory level should the company place an order?

2. If the company can find a quality tire supplier who would deliver tires at $2,300 each in a Just-in-Time manner so that they deliver the exact number of tires needed each day so that the company would not need to carry any inventory. If this could happen, they believe the cost of receiving the tires each day would be $1,000. Would this be an option they should consider?

2a) List the financial and non-financial aspects of this decision from question 2