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: Seattle Supplier Component 1 Atlanta Supplier Component 1 $50 Component 2 $40 $47 $500 $2700 1 5 $60 $50 $50 Unit Purchase Price p Truckload Cost Transit Time (days) Product Value v Suppose that you face a daily demand d₁ 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) TC(q)/T = (F+k)d q τυ - + d (p + c + tt * rv) + (s + 2) 9 2Fd q* = min 2s+rv' Imax S = d(T + TL) + $¯¹ (Pa)σd√T+TL) S=(TTL) ss S = d(T + µL) + $¯¹ (Pa)√/03(T + µl) +♂²o² 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

3. If you source component 1 from Seattle, your supplier could consolidate shipments of compo-
nent 1 and component 2 into the same trucks.

(a) To analyze this case, let a unit of combined component 1 and component 2 be such
that the daily demand dB for units is 1; note that each unit will contain 20 units of
component 1, and 30 units of component 2. What is the purchase price pB of a unit?
What is the value vB of a unit? What is the yearly (or daily) storage cost sB of a unit?

(b) Determine the optimal shipment size and optimal cost per day for sourcing component
1 and 2 from Seattle when using consolidated shipments. If the total cost per day of
sourcing component 1 from Atlanta and component 2 from Seattle combined is $2,426,
does it now make sense to source component 1 from Seattle?