Suppliers Freight Costs Price/Unit Annual Holding Cost Per Unit Lead Time (days) Annual Administrative Costs Dover Plastics $3,500 $5.10 $1.02 15 $4,000 Evan & Sons $3,000 $5.05 $1.01 12 $6,000 Farley, Inc. $4,500 $5.00 $1.00 20 $3,000 Score Criterion Weight Dover Evan Farley Total Cost 30 ? ? Consistent Quality 30 7 On-Time Delivery 20 8 9. 9. Environment 20 8 7 7
Wanda Lux must select a supplier for a plastic bottle and proprietary dispenser for its new hair shampoo. Three suppliers have placed bids; at Wanda’s request, all bids are for a shipping quantity of 20,000 bottles with annual requirements of 40,000 units. Wanda’s factory operates 250 days a year. The first table (below) shows each supplier’s price, estimated annual freight costs, and current lead times; management has added estimates for holding costs and administrative oversight costs for each supplier.
Beyond costs, however, Wanda has three other criteria considered important in the selection of a supplier. The second table (see below) shows all the criteria, their weights, and the scores for all of them except total costs, where a score of 1 indicates “poor” and 10 indicates “superior.” Because all three suppliers have done business with Wanda Lux before, management will assign a score of “10” to the supplier with the lowest total annual cost, a score of “8.5” for the next lowest cost, and a score of “7.0” for the worst cost of the three.
a. Which of the three suppliers will provide the lowest annual cost to Wanda Lux?
b. Given Wanda’s criteria and weighting system, which supplier should Wanda award the contract to?
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