Question

Kim Distribution Services (KDS) distributes food purchased in bulk to small retailers. The firm is divided into two divisions: Purchasing and Distribution. Purchasing is responsible for ordering goods from the manufacturer receiving them, and then moving them to the appropriate location in the warehouse Distribution is responsible for taking orders from retailers, picking the products from the warehouse for the orders, and packaging the orders for shipment. KDS has a policy of filling every order on the day of the order. If the articular item, it will ship a partial order and complete the order when the item is back in stock. Occasionally, an order will not have to be packaged if the retailer chooses to take delivery at the KDS loading dock Distribution has 15 employees who are responsible for the activities, and all 15 are trained to handle any of the three tasks. Each of these employees works 40 hours per week for 50 weeks. There is an allowance of 15 percent of the employees' time for training and other administrative tasks. The total costs of distribution for the coming year are estimated to be $826,200. When asked, the manager of Distribution estimated the following times for each of the three activities: • Taking orders: 10 minutes. • Picking orders: 14 minutes • Packaging orders 20 minutes. Until now, KDS used a commercial vendor to ship orders. The manager of Distribution believes the system described is too simple in two ways. First, if a retailer is ordering from KDS for the first time, Distribution has to take time to verify the Retailer details (shipping address, credit, and so on). The manager estimates this additional time to total 30 minutes. In addition, some orders are quite complex This happens when a retailer orders many different items in one order. The manager estimates that a complex order takes an additional 20 minutes to pick, on average Required: a. What is the total time required for taking an order?

Answer 1

a. Total time required for taking an order = Current estimated time + Additional time = 10 + 30 = 40 minutes

b. Total time required for picking an order = Current estimated time + Additional time = 14 + 20 = 34 minutes

c. Distribution costs = 826,200

Available time = 15 employees * 40 hours * 50 weeks * (100% -15%) = 25500 hours or 1,530,000 minutes

Cost per minute = 826,200 / 1,530,000 = 0.54

Total cost = ( 40+34 + 20) * 0.54 = 50.76