Base Stock Models Jet WithUs, a private jet charter provider, keeps critical spare parts for maintenance of its aircraft fleet at various airports. There is a particular part that they are concerned about because it is expensive ($10,000) but critical for the safe operation of the aircraft. The demand for this part is low, just 12 per year, and quite variable (can be assumed to be Poisson). The part is ordered from a supplier that delivers the part at no additional cost with a lead time of one month. d) What type of inventory model would be the most suitable here and why? c) Compute and describe the optimal inventory policy if management wants to guarantee a desired fill rate of 99%. What are the associated average backorders and inventory in the system? 1) Is 99% the correct fill rate in this case? The inventory carrying rate is estimated to be of 25%. The cost associated with having the aircraft down for a day is estimated to be $1000. What should the “optimal” fill rate and associated inventory policy be? What would be the solution if you approximated the demand distribution by a normal with mean 0 and standard deviation ?

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