Need Help Understanding Lead Time and Just In Time formulas for questions 4 and 5.

Please show work, excel formula, so I can understand how to do the problem.

Thank you.

Ryanair is a popular budget airline that has employed multiple strategies to maintain its competitive edge. One of its approaches involves reducing the turnaround time between flights by eliminating seat pockets and tray tables to facilitate quicker cleaning. Additionally, the airline flies to secondary airports and imposes weight limits on carry-on luggage by charging fees, among other tactics. Ryanairs choice to operate solely with the Boeing 737 model allows for streamlined maintenance operations and a reduction in unnecessary expenses.

Another way to cut cost is inventory management. For example, the company uses 52,500 tires per year. Because of the physical constraints endured by these tires, they are expensive, $2,000 each. Ryanairs holding costs H are 30% of the unit cost per year. To purchase tires, they rely on reverse auctions where they specify the number of tires, tire characteristics, and delivery schedule. Tire companies then submit bids to try to win the business. Ryanair procurement managers are fond of this purchasing method, but it is expensive, costing the company about

$70,000 each time the company goes through this process to place an order.

Questions:

1. Assuming that the lowest bid for tires will be $2,000, how many tires should Ryanairorder each time it places an order?
2. Referring to your answer in part a., how many orders per year will Ryanair need to make per year if the demand for tires remains at 52,500?
3. Referring to parts a. and b., what is the total yearlyinventory cost (i.e., setup cost + holding cost)?
4. Assuming that demand for tires is steady throughout the 365-day year, and if lead time on getting tires is 9 days, at what inventory level should Ryanair place an order?
5. Suppose Ryanair couldfind a tire supplier who could deliver tires at $2,050 each, ina just-in- time arrangement. They would deliver the exact number of tires needed on site, each day so that Ryanair would not need to carry any inventory. Under this condition, Ryanair believes its cost of receiving the tires each day would be $1,000.
   • Calculate the total yearly cost of each of the two options (reverse auction and just-in- time), including purchasing costs.