You manufacture a product in a facility in Chattanooga, and you manage a set of suppliers from whom you source components required for production. In this problem, we will consider two major components. Currently component 1 is produced by a nearby supplier in Atlanta, and component 2 is pro- duced by a supplier in Seattle. Your Seattle supplier has offered to produce both components for you and a cheaper price for component 1, and you need to decide if it makes sense. Here is the relevant information: Atlanta Supplier Component 1 Seattle Supplier Component 2 Component 1 Unit Purchase Price p $50 $40 $47 $500 $2700 Transit Time (days) 1 $60 5 $50 $50 Truckload Cost Product Value v Suppose that you face a daily demand di = 20 units/day for component 1, and d₂ = 30 units/day for component 2. Your annual inventory carrying cost rate is 20% per year, and 1 unit of either component 1 or 2 has a storage cost of $25 per year (divide by 365 to get cost/day). Ignore the capacity Q of a truckload in this problem. Pipeline Inventory Cost Per Time = d(tt * rv) (F+k)d TC(q)/T = q +d(p+c+tt* rv) + (8+770) 9 2Fd q* = min max 2s+rv S = d(T + TL) + ¢¯¹ (pa)¤¿√T+TL) Sd(TTL) ss S = d(T + µl) + ¢¯¹(Pa) √ o² (T + µL) + d²o² R = dTL +§¯¹ (pa)σd√√TL

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Related questions

Question

1. Determine the optimal shipment size q^∗ and the optimal cost per day for sourcing component 1
from the Atlanta supplier. Be sure to include transportation costs per day, pipeline inventory
costs per day, purchasing costs per day, and facility inventory costs per day.

2. Determine the optimal shipment size q∗ and the optimal cost per day for sourcing component
1 from the Seattle supplier. Again, be sure to include transportation costs per day, pipeline
inventory costs per day, purchasing costs per day, and facility inventory costs per day. Does
it make sense to source component 1 from Seattle?