Question: please develop your answers using EXCEL Problem-4) (Multi-Echelon Inventory) A distributor is positioned in the supply channel between its customers and suppliers. This distributor knows
please develop your answers using EXCEL
Problem-4) (Multi-Echelon Inventory) A distributor is positioned in the supply channel between its customers and suppliers. This distributor knows that the customers maintain an inventory that should be taken into account in planning its inventory levels. In the spirit of cooperation, the customers share their end demand data with the distributor. For a particular item supplied by the distributor to three customers in his territory, the monthly demand for an item valued at the customer echelon at $35 per unit as follows: Demand Std. Dev., Units/Month Customer 1 Avg. Demand, Units/Month 425 65 2 333 52 3 276 43 Combined 1,034 94* *) Estimated as 65 +52 +43 = 94 The item is valued a little less as the distributor ($30 per unit) since some costs such as transportation to customers have not yet been added. Inventory holding cost is estimated at 20 percent per year at both echelons. Order-placement cost for the customers is $50 per order. The distributor can supply the customers with two weeks, but it takes vendors four weeks to fill the distributor's replenishment orders. Customers set their in-stock probability during the order cycle at 95 percent, whereas the distributor used 90 percent. Both echelons use the reorder point method of inventory control. The distributor places orders on the vendor for 2,000 units to realize a purchase discount. How much inventory of this item should the distributor stock if no inventory is assumed to be in transit to customers
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