Question

Alpha Medical Manufacturing (AMM), located in Punta Gorda, Florida, produces medical devices for orthopedic surgery including replacement parts for human knees, hips, and elbows, and surgical tools. One product they assemble in their factory is a special aluminum-alloy surgical screw used to anchor human tissue to the bone. The screw consists of four component parts, one being the aluminum alloy while the other three parts are made of medical grade plastics. AMM is evaluating three Tier 1 suppliers to manufacture the aluminum part of the orthopedic screw. Annual demand for this item is 20,000 units per year, with 365 days in a year. Other information is shown in the table below. Alpha Medical Manufacturing (AMM) Outsourcing Information for a Surgical Screw Contract Price per Price per Tariff Transport Order Cost to Store Order Lead Manufacturer Unit (C) @ Unit (C) @ Cost (T) Mode Cost Costs One Unit per time in (Tier 1 Supplier) Q = 10,000 Q = 20,000 per Unit (Tm) per Unit (Co) Year (Ch) Days Xiajing Supplier $1.15 $0.89 $0.15 $0.35 $665 $1.30 180 Boston Medical $1.33 $1.15 $0.00 $0.20 $390 $0.95 110 Supplier Werkzeug $1.42 $1.11 $0.17 $0.20 $335 $0.95 120 Supplier a. What is the total annual logistics cost for each supplier when Q = 10,000 and Q = 20,000? Do not round intermediate calculations. Round your answers to the nearest dollar. Order Quantity (Q) 10,000 units 20,000 units Global Supplier to Xiajing Supplier Boston Medical Supplier a Werkzeug Supplier to b. What supplier and order quantity do you recommend based on these total costs? The company should choose -Select- and the order quantity of -Select- units.

Answer 1

Annual Demand D = 20000

Working Days = 365

Total Cost = Purchase Cost + Tariff Cost + Transport Mode Cost + Order Cost + Holding Cost + In Transit Inventory Cost

Total Cost = D*P + D*Tc + D*Tm + (D/Q)*Co + (Q/2)*Ch + D*(LT/365)*Ch

For Order quantity Q=10000 units

Total Cost for Xiajing Supplier = 20000*1.15 + 20000*0.15 + 20000*0.35 + (20000/10000)*665 + (10000/2)*1.30 + 20000*(180/365)*1.30

Total Cost for Xiajing Supplier = 53651.92 = 53652

Total Cost for Boston = 20000*1.33 + 20000*0.00 + 20000*0.20 + (20000/10000)*390 + (10000/2)*0.95 + 20000*(110/365)*0.95

Total Cost for Boston = 41856.03 = 41856

Total Cost for Werkzeug = 20000*1.42 + 20000*0.17 + 20000*0.20 + (20000/10000)*335 + (10000/2)*0.95 + 20000*(120/365)*0.95

Total Cost for Werkzeug = 47466.58 = 47467

For Order quantity Q=20000 units

Total Cost for Xiajing Supplier = 20000*0.89 + 20000*0.15 + 20000*0.35 + (20000/20000)*665 + (20000/2)*1.30 + 20000*(180/365)*1.30

Total Cost for Xiajing Supplier = 54286.92 = 54287

Total Cost for Boston = 20000*1.15 + 20000*0.00 + 20000*0.20 + (20000/20000)*390 + (20000/2)*0.95 + 20000*(110/365)*0.95

Total Cost for Boston = 42616.03 = 42616

Total Cost for Werkzeug = 20000*1.11 + 20000*0.17 + 20000*0.20 + (20000/20000)*335 + (20000/2)*0.95 + 20000*(120/365)*0.95

Total Cost for Werkzeug = 45681.58 = 45682

The Compnay Should chose Boston Medical supplier and the order quantity of 10000 units.