Consider a supermarket deciding on the size of its replenishment order from Procter & Gamble. What costs should it take into account when making this decision? How do the various costs change as it decreases the lot sized? As the demand for the product grows, how would you expect the inventory measured in days of inventory to change? If the manager wants to decrease the lot size without increasing the costs he incurs, what are some of the actions he can take?
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