Discuss about how any additional supply chain disruptions might affect the availability of a magnet which is essential for their headphones. It is the start of February and YOLO must commit to a magnet quantity for
delivery in July. Each magnet ordered in February will cost YOLO €40/unit. YOLO
estimates that demand for magnets in July at a price of €70/unit will be normally
distributed with a mean of 250,000 and a standard deviation of 200,000. If YOLO’s
demand in July exceeds its regular order (the amount ordered in February) then YOLO
can obtain additional units on the spot market. The spot market price for these magnets
in July is estimated to be €50/unit. Magnets not used in July will certainly be used in
August. However, magnets ordered in March for August delivery are expected to cost
€36/unit. Furthermore, due to physical storage costs and opportunity costs of capital
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