An electronics retailer is evaluating different transportation modes for its US market. The retailers two main products are standard headphones and customized cellphones and the retailer offers these products online out of its centralized warehouse in Iowa. The annual holding cost at this warehouse is 15 percent.

The retailers manufacturing facility is currently located overseas. The retailers transportation options from its manufacturing facility to its centralized warehouse are water and air transportation modes. Water transportation results in a lead time of 7 weeks and air transportation results in a lead time of 0.5 weeks. The water transportation mode requires shipments of size 8,000 units and costs about $0.25 per unit, and air transportation requires shipments of size 2,000 units and costs about $1.5 per unit.

Weekly demand for standard headphones is normally distributed with a mean of 2,200 and a standard deviation of 250, and each standard headphone costs about $35. Weekly demand for customized cellphones is normally distributed with a mean of 1,800 and a standard deviation of 900, and each customized cellphone costs about $250. The manufacturers target cycle service level is 98 percent. Under the current periodic review policy in place, the retailer orders every four weeks when using water transportation and orders every week when using air transportation.

1. Considering the annual costs of inventory and transportation, which transportation option do you recommend to this manufacturer for each product?
2. Please (qualitatively) describe a general framework to this manufacturer for selecting an appropriate transportation mode for its variety of products in its different market.