Suppose we have two ways to source a product. One way is from the local supplier, while a second way is from a distant supplier.

The terms and parameters for each source are as given in following table:

Local supplier Distant supplier

Cost per unit, $$1\mathrm{.}15$ $$1\mathrm{.}00$

Lead time $($no uncertainty$),3$ weeks $12$ weeks

Transportation cost per unit, $$0\mathrm{.}10$ $$0\mathrm{.}12$

Suppose demand for the component is ; $.($Assume normally distributed demand$)$

Suppose we have a per unit holding cost of $.$ This applies to all inventory in the system.

Compute the total landed cost per unit $($equal to the procurement cost plus transportation cost plus holding cost for pipeline stock$)$ for each source. Round to two decimal places.

Local supplier total landed cost $($TLC$)$:

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Distant supplier total landed cost $($TLC$)$:

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Problem V$\mathrm{.}4.$b

$0\mathrm{.}0/2\mathrm{.}0$ points $($graded$)$

Suppose we source from a single supplier, and suppose we assume a periodic review policy with r $=1$ week; suppose we have a shortage cost $\backslash$pi $=0\mathrm{.}30/$unit$.$

What is the base stock for each option that minimizes the expected costs? Round to the nearest whole number.

Base Stock for Local Supplier:

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Base Stock for Distant Supplier:

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