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Computer Store is a retailer of computer equipment in the Chicago with 4 retail outlets. Each outlet orders independently. Deman at each retail outlet averages 10000 units/week. Each unit costs $400, and CS has an annual holding cost of 25% of unit cost. The fixed cost of each order is $1000 regardless of quantity. Assume 50 weeks in a year.
a) Given that each outlet orders independently and gets its own delivery, determine the optimal quantity at each outlet.
b) CS is thinking of centralizing purchasing for all 4 outlets. In this setting, CS will place a single order (for all outlets) with the supplier. The supplier will deliver the order on a common truck at the transit point. Since individual requirements are identical across all outlets, the total order is split equally and shipped to the retailers from this transit point. The entire operation will increase the fixed cost of placing an order to$2000. If CS manages to order optimally, determine the new optimal quantity for the new central purchasing policy.
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