Tom and Stacy work together to order items for a large clothing retailer. They disagree about ordering a popular jeans brand from Italy. The demand for the jeans is variable and follows Normal distribution. They use (Q, R) policy to manage their inventory. Stacy suggests that they should order 200 pairs when their inventory reaches or falls below 50. While Tom agrees that the order size should be 200, he thinks that they should place an order when their inventory reaches or falls below 80. 5.

Finally, Tom and Stacy in Problem 3 come to an agreement and decide to place an order for 200 pairs of jeans when their inventory reaches or falls below 60. This results in cycle-service level of 90 percent. However, they get a call from the supplier of jeans in Italy, informing them that the demand for the jeans has increased throughout Europe. Because the supplier does not have enough capacity to satisfy the new demand, future orders will take twice the time to deliver. Specifically, the suppliers order lead time is doubled from 1 week to 2 weeks. Tom and Stacy decide not to change the new ordering policy they agreed upon, since their demand has not changed. If the new policy is implemented, explain why each of the following statements is true or false.

a. The cycle-service level is reduced, but fill rate remains the same.

b. Total average annual inventory holding cost is decreased.

c. Total average annual order setup cost is decreased.

d. Total average annual shortage cost is increased.