a. Assuming that the lowest bid for tires will be $2,250, what is the number of tires that Southwest should order each time it places an order?
b. Referring to your answer in part a., how many orders per year will the company need to make per year if the demand for tires remains at 40,000?
c. Referring to parts a. and b., what is the total inventory cost (excluding purchase cost) for the inventory plan you have calculated?
d. Assuming that demand for tires is steady throughout the 365 day year, and if lead time on getting tires is 11 days, at what inventory level should SW place an order?
e. Suppose Southwest could find a quality tire supplier who would deliver tires at $2,300 each in a Just-in-Time manner so that they deliver the exact number of tires needed each day so that SW would not need to carry any inventory. If this could happen, SW believes it’s cost of receiving the tires each day would be $1,000. Would this be an option SW should consider? Discuss both the financial and non-financial aspects of this.