Question

Whirlpool Corporation is a major appliance manufacturer with a large refrigerator plant in Amana, IA Whirlpool purchases 120,000 motors each year from Hansen Electric Corporation -located in the Dallas, TX metro area- at a price of $120 per motor. Demand of motors at Amana plant has been relatively constant for several years and is expected to stay that way. CORPORATION ana Each motor averages about 10 pounds in weight Hansen ships each Whirlpool order within a day of receiving it. At its Amana assembly plant, Whirlpool carries a safety inventory equal to 25% of the average demand for motors during the delivery lead time The Logistics & Supply Chain Manager at Whirlpool-Amana is considering several proposals for transportation and he has asked you to help in the analysis and to make a recommendation. The details of the several options that are being considered are provided in the table below Carrier Range of Quantity shipped (in cwt) 500+ 400+ 100+ 50-149 150-249 250+ Shipping Cost (S/cwt) 2.50 3.00 6.50 8.00 6.00 4.00 Transit time (days) Rail-Express Maersk Line Midwest Trucking Golden Freightways Golden Freightways Golden Freightways 7 One additional option to consider: Golden's representative has proposed lowering the transportation rate even further, from their current lowest $4/cwt to $3/cwt and delivering express in just 2 days but only if Whirlpool is willing to increase its order size to 3,500 motors What would you recommend the Logistics Manager at Whirlpool to do?

Answer 1

Demand	120000	motors/year
	333	motors/day
Weight	10	Pounds/motor

Safety inventory 25%of average demand for motors

Carrier		Range of quantity shipping (in cwt)	Shipping Cost ($/cwt)	Transit Time (days)
Rail-Express		500+	2.50	9
Maersk Line		400+	3.00	7
Midwest Trucking		100+	6.50	3
Golden Freightways		50-149	8.00	3
Golden Freightways		150-249	6.00	3
Golden Freightways		250+	4.00	3
Golden Freightways		250+	3.00	2

Demand		12000	cwt/year	Note: we need the weight of total demand. This is calculated by multiplying demand and weight (120000*10). Now to convert to cwt we need to divide it by 100
		1000	cwt/month
		33	cwt/day

1. Looking at the details given and closely analyzing the numbers. I believe the only option what we have which suits the requirement of Whirlpool is Golden Freightways of the range of quantity shipping 50-149 cwt costing 8$/cwt.

Reason: By simplifying the details given we can clearly see that Whirlpool Amana have the requirement 33 cwt/day of motors. The only company which offers to deliver within Whirlpools demand is Golden Freightways quantity ranging from 50-149 cwt. Whirlpool requires around 123 cwt of motors in every 3 days (This requirement also include 25% of inventory). Hence, the only option left with Whirlpool is paying 8 $/cwt, which will cost up to 984 $ every 3days for transportation.

2. In another case, if we assume that Whirlpool demand increase. I would recommend Whirlpool to go for golden freightways range of 250+ costing 3 $/cwt.

Reason: In any company, it is always better to focus on reducing the delivery time. This will help Whirlpool maintain the inventory every 2 days. In case of emergency, Golden freightways can deliver the product at a short period of time compared to other courier companies.

It is also better to give orders to rail express twice a month to reduce the delivery expenses. In this case, Whirlpool will have to reduce 50cwt of motors in every order of Golden Freightway. By doing this Whirlpool can save .50 $/cwt for every order to rail express.