Question

2. As a logistics manager, you determined the cost of using a 3PL storage space/warehouse. The cost information is given below: Option A: Rent as much space as you need and pay $4.5/sq. foot per month. Option B: Rent a manual handling warehouse and its monthly charges include fixed cost of $2400 plus $3.5 per sq. foot of space. Option C: Rent a semi-computerized storage at $3.00 per sq. foot that has a monthly fixed cost of $4,600 a. Write cost functions for the three options. (6) b. Plot the cost functions on a graph paper. Use an appropriate scale and clearly show the intersection points of the cost functions. (20) c. Determine which option should minimize storage cost for what range of demand. (5) Note: Your graph paper must be clean with straight lines accurately drawn using a ruler and clearly showing points that you connect. Write your decision in words.

Answer 1

solution: 2 Giren option A pay = 84.5/swfoot option B: fixed cost = 82400 plus $3.5 perso,foot optione: $3.00 persa foot, fixed cost=84600. (a) Cost functions for the 3 options are: >All costs are calcolated on monthly basis. Letx axis denotes space required in square fout lety axis denotes copte per month in dollars. The cost function for the 3 equations become. for options A = f(x)= 4.5% foroptin B =96) = 3.5 2+ 2.400 for option co hex) = 3x + 46oo. (6) The plot of the cost function is:

The plot of f(x), g(x), h(x) for different rates of X 0 1000 4500 2000 9000 3000 4000 13500 18000 5000 Fasco f(x) 0 12900 1 Gunu 19900 9400 g(x) 2900 5900 7600 10600 13600 19600 16600 h4) 4600

Graph: f(x) g(x) A Costa) 20000 18000 (Good (69500 TISDOO) (4000 12000 2000 TTTTT Jo 2000 2000 2000 4000 5000 6ooo tooo 3 Area frea (sq fort) @ The option should minimile storage Cost 18: » for area requirement less than 2400 fquare foot optim A f(x) is best minimising storage cost

for area sequirement 240oto 3500 square foot optim B g(x) is best greater than or equal to for area requirement h(x) is a best .3500 square foot, option C has o