Problem statement - Supply Chain Coordination Part I

S-Mart is a local convenience store (retailer), which manages an inventory of a SKU for resell to customers. S-Mart faces a constant demand for the SKU (i.e., demand rate is "horizontal" and not random) with the annual total demand being 25,000 units, and orders from a local supplier for resupplies.

S-Mart uses the EOQ model to manage its inventory. It costs $60 ordering cost for S-Mart to place an order. The supplier charges S-Mart $50 for each unit of supply. S-Marts inventory holding cost per unit, per year is 35% of the cost of purchase from the supplier. (Let's assume all assumptions for the EOQ model are satisfied.)

For every order received from S-Mart, the supplier executes one production run to fully and instantly meet the order's requirement. The suppliers setup cost for each production run is $180. The supplier delivers the order to S-Mart immediately after production, so the supplier holds no inventory.

Answer the following questions:

a. The EOQ that is optimal for the entire supply chain (i.e., both firms together) =

(Please round your answer to the whole number.)

b. If S-Mart agrees to exercise the EOQ above in the next year, then S-Marts (retailer) total annual costs for inventory holding and ordering =

(Please round your answer to retain one decimal place.)

c. If S-Mart agrees to exercise the EOQ above in the next year, then the suppliers total annual costs for production setups =

(Please round your answer to retain one decimal place.)