Question

Problem 1. ABC Electric Repair is a repair facility for several major electronic appliance manufacturers. ABC wants to find a low-cost supplier for an electric relay switch used in many appliances. The annual requirements for the relay switch are 100,000 units. ABC operates 250 days a year. The data below are available for two suppliers, Kramer and Sunrise, for the part. Which supplier provides the lowest annual total cost to Compton? Freight Costs Shipping Quantity Lead CarryingTime Supplier 2,000 10,000 Price/Unit Cost/Unit (days) Admin Costs Kramer $30,000 $20,000 $5.00 $1.00 5 $10,000 Sunrise$28,000 $18,000 $4.90 $0.98 9 11,000 Problem 2. Schneider Logistics Company has built a new warehouse in Columbus, Ohio, to facilitate the consolidation of freight shipments to customers in the region. How many teams of dock workers Schneider should hire to handle the cross-docking operations and the other warehouse activities? Each team costs $5,000 a week in wages and overhead. Extra capacity can be subcontracted at a cost of $8,000 a team per week. Each team can satisfy 200 labor hours of work a week. Management has estimated the probabilities below for the requirements. How many teams should Schneider hire? Requirements (hours/wk) Number of teams Probability 200 400 600 0.20 0.50 0.30

Answer 1

Problem 1

Computations

Cycle stock carrying cost Carrying Lead Freight time costs Transit carrying Purchase Admin Supplier Deand a Price cost/ unit Total cost cost cost cost Kramer 100000 2000 5 Sunrise Kramer 100000 10000 5 Sunrise 5 9 5 9 30000-(D3/2)*F3 28000s(D4/2)*F4 20000 =(D5/2)*F5 18000 =(D6/2)"F6 -C3*F3*G3/250 =C4"F4"G4/250 =C5*F5"G5/250 =C6"F6"G6/250 -C3*E3 =C4E4 =C5 *E5 -С6"E6 10000 11000 10000 11000 -SUM(H3:L3) =SUM(H4:L4) =SUM(H51.5) -SUM(H6:L6) 4 100000 2000 4.9 0.98 6 100000 10000 4.9 0.98

So, the minimum cost will be realized for 'Sunrise' for a shipping Qty = 10,000

Formulae used

• Purchase cost = Demand x Unit price
• Cycle stock carrying cost = (Q/2) x Unit carrying cost
• Transit carrying cost = Annual demand x Lead time x Unit carrying cost / 250
• Freight and admin cost are given directly.