1. What is the annual inventory cost of the current system in which product is produced, labeled, and packed in Malaysia before being shipped to the DC?
2. How would the inventory cost change if labeling and packaging were moved to the DC? Evaluate the change in inventory costs as the correlation coefficient of demand between any pair of customers varies from 0 to 0.5 to 1.0.
3. How should PE set up its production, labeling, and packaging processes? Does your answer change if the additional cost of labeling and packaging at the DC is reduced to $1 (from the current value of $2)?