Question

Motorola obtains cell phones from its contract manufacturer located in China to supply the domestic market,
which is served from a warehouse located in Noida. Daily demand at the Noida warehouse is normally
distributed, with a mean of 5,000 and a standard deviation of 4,000. The warehouse aims for a CSL of 99
percent. The company is debating whether to use sea or air transportation from China. Sea transportation
results in a lead time of 36 days and costs $0.50 per phone. Air transportation results in a lead time of 4 days
and costs $1.50 per phone. Each phone costs $100, and Motorola uses a holding cost of 20 percent. Given
the minimum lot sizes, Motorola would order 100,000 phones at a time (on average, once every 20 days) if
using sea transport and 5,000 phones at a time (on average, daily) if using air transport. To begin with, assume
that Motorola takes ownership of the inventory on delivery.
a. Assuming that Motorola follows a continuous review policy, what reorder point and safety inventory should
the warehouse aim for when using sea or air transportation?
b. How many days of safety and cycle inventory will Motorola carry under each policy?
c. How many days of cycle inventory does Motorola carry under each policy?Amrita School of Business Page 4 of 5
d. Under a continuous review policy, do you recommend sea or air transportation if Motorola does not own
the inventory while it is in transit?
e. Does your answer change if Motorola has ownership of the inventory while it is in transit?
Assume that Motorola follows a periodic review policy. Given lot sizes by sea and air, Motorola would have to place
an order every 20 days using sea transport but could order daily using air transport.
f. What maximum inventory level and safety inventory should the warehouse aim for when using sea or air
transportation?
g. How many days of safety inventory will Motorola carry under each policy?
h. How many days of cycle inventory does Motorola carry under each policy?
i. Under a periodic review policy, do you recommend sea or air transportation?
j. Does your answer change if Motorola has ownership of the inventory while it is in transit?

Answer 1

Answer:

ask one one question , please then we can answer