Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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Machine Supply Co. plans to open a new branch in Houston, TX to provide local support to its customers in the area. The company currently considers two locations (small and large) for its new branch. While the small location can store up to 500 units of product, the large one can store up to 1200 units (more than these amounts cannot be stored at any time). However, the large location costs an additional $1000 per month to rent compared to the small location. Transportation companies charge different amounts for small and large locations as provided in the table below. The expected demand in the greater Houston area is 52000 units and each unit costs $300. The inventory holding rate per year is 24%. Given the below information about two locations and transportation company. Which branch location should be chosen by Machine Supply CO.? NOTE: It is expected that the average inventory level in Memphis, TN (the source facility) will not be affected by these decisions. If you need any additional information, please note down your assumptions.
Transcribed Image Text:Name Fixed Transportation Cost per Delivery In-Transit Time (days)
3
Small
Large
2
$500
$950
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