6. You now realize that you have forgotten something. Each time you place an order to your supplier, they also tack on a fixed charge of $100 to process your order. Let's call this value k = $100. (a) Since k is incurred exactly once per order, you decide that you can use F + k as your fixed ordering and transportation cost per cycle and you adjust your EOQ formula to: = 2(k+F)d 2s+rv Compute the best shipment quantity q* remembering that q* ≤ 700. (b) What is the shipment headway H (time between shipments) for your value of q*? Since you want regular shipments, modify the optimal shipment quantity (to qr) such that the headway is a multiple 0.5 weeks by rounding to the closest such headway. (c) Compare the total logistics costs for qT with regular headways to the costs for q*. Total logistics costs now include: • Truckload transportation cost per week • Fixed ordering costs per week • Facility inventory cost (storage and carrying cost) per week • Pipeline inventory cost per week (from part 1) Note how the costs for either shipment quantity are nearly identical.
In this problem, your company is a distributor of products. You serve as an inventory
manager for the regional distribution center (DC) here in the Atlanta area. In this role,
you
Atlanta DC. Once you receive the products at the DC, they are stored in inventory until
they are picked, packed, and shipped outbound to your company’s downstream customers
in response to orders.
For each of your products, you currently use a single, dedicated supplier. Each of your
suppliers ships their products to you from their facility using trucking services, and they
provide you with choices of different LTL or truckload trucking carriers depending on your
shipment size.
Consider managing inventory now for product 101 produced by Supplier A. Currently,
you face demand for product 101 of about 200 units per week. Each unit of product 101
has a purchase cost p of $500 and you decide to value your inventory at the slightly higher
rate of $550 (v). As is typical, you are required to pay for products when you order. For
inventory carrying cost (either in-transit or at your facility), you assume an annual carrying
cost rate r = 18% per year; this rate includes your capital cost but also components that
model product quality loss over time, risk of theft, and risk of obsolescence. You estimate
that storing one item of product 101 in your DC requires an equivalent rent (storage cost)
of s = $10 per unit per year
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