TCX, Inc. is an Indian electronics system integrator, developing a new product as a generational upgrade. Owing to their long business history, they intend to work with Deltic, Inc. as the supplier of a key component for this product. Deltic sells this component for $( ) per unit with a 4-month delivery lead time. Assume Deltic covers all transportation and related processing until delivery. TCXs demand forecast for the upcoming selling season (12 months) is a normal distribution with mean ( + ) and standard deviation /. TCX sells each unit, after integrating their proprietary software, for $ . Assume that TCX uses a holding cost rate of %, and any leftover units can be sold for $ on average. 1) [20] Due to the long lead time and high minimum order quantity required, TCX is planning on a single order from Deltic to meet their needs in the next year. How many of these components should TCX order? Calculate the resulting expected annual profits for TCX. Suppose the COO at TCX is considering an online electronic component supplier, eTECH, to procure this component from. eTECHs main value proposition is that they offer 100% in-stock probability with 5-day delivery on all TCX orders, regardless of their quantity and time. TCX promises a 2-week lead time to their clients, so this highly reactive capacity at eTECH would enable TCX to fulfill all their orders on time. The downside is that eTECHs delivered unit price is $ . Upon negotiations, concerned that they would lose some business with TCX, Deltic agrees to deliver a midseason 2nd order with no price increase. 2) [60] Given the above, evaluate TCXs alternatives below: a) [10] Cut ties with Deltic, and procure the component only from eTECH. b) [25] Work only with Deltic, by using their midseason 2nd replenishment as well. In this case, assume TCXs demand forecast would not improve during the season, due to the long lead time. c) [25] Use both: A single pre-season order from Deltic, and then supply from eTECH as needed. Suppose the COO at TCX would also like to investigate the alternative of strengthening their ties with Deltic by setting up a periodic replenishment contract with a 4-month order cycle, considering that TCX will need similar components in the future generations of their products. 3) [20] Analyze this alternative to find the resulting annual expected profits for TCX. Note 1: Ignore year-to-year price/cost changes. (Assume they stay constant in real terms.) Note 2: Ignore the end-of-year leftovers. (Assume they can be sent back to Deltic at no loss.) 4) [5] BONUS: State which alternative should TCX use to supply these components.

SOLVE 3 only