Question: Base-stock Model: Consider two situations specialized vs. common component, both managed using a base-stock inventory control policy with an in-stock probability of about 97.7%, corresponding

Base-stock Model: Consider two situations specialized vs. common component, both managed using a base-stock inventory control policy with an in-stock probability of about 97.7%, corresponding to a z-value of z=2. In the specialized situation, there are 5 special parts each with independent Normal demand during replenishment lead time (DDLT) with mean 100 and std.dev. 30.In the common component situation, the 5 special parts are replaced by one common part that can be used to satisfy the demand for each of 5 special parts. Replenishment lead for the common part and each specialized part is the same. Calculate the base-stock level, Rs, for each of the specialized components and the corresponding base-stock level, Rc, for the common component. Which system specialized or common component will carry lower total safety stock? Explain.

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