Refer to the example in One Order/Production Opportunity of the Module Five lecture document. Since the manufacturer is concerned that not all of the products might be bought by the distribution center, does the manufacturer tend to produce fewer for the upcoming season? If so, does it make sense for the distribution center to offer an incentive to the manufacturer to produce more so that the distribution center might be able to buy as many as desired? For example, does it make sense for the distribution center to pay a penalty to the manufacturer for each product produced by the manufacturer but not bought by the distribution center? Discuss such potential incentives with reasoning and examples.
Refer to the formulas given in the Multiple Order/Production Opportunities of the Module Five lecture document: safety stock, reorder level, order quantity, and average inventory level.