Question 2: Metro Tech buys three components from a local wholesaler. The annual demand for components A, B, and C is 500, 3000, and 6000 units respectively. The agreed purchase price is $20, $15, and $10per unit for A, B, and C respectively for each product. The holding cost is estimated to be 20% per year. The ordering cost consists of handling and trucking costs. The handling cost is $100 for each type of component regardless of the number of items ordered. In addition to the handling cost, Metro Tech must pay a trucking cost of $500 for each delivery regardless of the total number of components in the order. Currently, all three items are being ordered independently using EOQ models. A proposal has been made to combine the ordering of the three items to save on trucking costs. Analyze the current and the prosed scenario and show the results below. Input Data: Demand items/year Item Cost in $/item Holding Cost as %/year Ordering Cost $/order # of Orders/ year Economic Order Quantity Holding Cost in $/year Ordering Cost in $/Year Total Cost of ordering A Current Scenario Analysis (Independent ordering): # of Orders/ year Economic Order Quantity Holding Cost in $/year Ordering Cost in $/Year Total Cost of ordering Jointly A Proposed Scenario Analysis (Joint ordering): B A B B C C C Combined Order No Change No Change No Change Total Total Total cost savings due to ordering jointly: Can you estimate the total savings in trucking costs? Why is this different from total savings?
Question 2: Metro Tech buys three components from a local wholesaler. The annual demand for components A, B, and C is 500, 3000, and 6000 units respectively. The agreed purchase price is $20, $15, and $10per unit for A, B, and C respectively for each product. The holding cost is estimated to be 20% per year. The ordering cost consists of handling and trucking costs. The handling cost is $100 for each type of component regardless of the number of items ordered. In addition to the handling cost, Metro Tech must pay a trucking cost of $500 for each delivery regardless of the total number of components in the order. Currently, all three items are being ordered independently using EOQ models. A proposal has been made to combine the ordering of the three items to save on trucking costs. Analyze the current and the prosed scenario and show the results below. Input Data: Demand items/year Item Cost in $/item Holding Cost as %/year Ordering Cost $/order # of Orders/ year Economic Order Quantity Holding Cost in $/year Ordering Cost in $/Year Total Cost of ordering A Current Scenario Analysis (Independent ordering): # of Orders/ year Economic Order Quantity Holding Cost in $/year Ordering Cost in $/Year Total Cost of ordering Jointly A Proposed Scenario Analysis (Joint ordering): B A B B C C C Combined Order No Change No Change No Change Total Total Total cost savings due to ordering jointly: Can you estimate the total savings in trucking costs? Why is this different from total savings?
Purchasing and Supply Chain Management
6th Edition
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Chapter16: Lean Supply Chain Management
Section: Chapter Questions
Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...
Related questions
Question
Transcribed Image Text:Question 2: Metro Tech buys three components from a local wholesaler. The annual demand
for components A, B, and C is 500, 3000, and 6000 units respectively. The agreed purchase
price is $20, $15, and $10per unit for A, B, and C respectively for each product. The holding
cost is estimated to be 20% per year. The ordering cost consists of handling and trucking
costs. The handling cost is $100 for each type of component regardless of the number of items
ordered. In addition to the handling cost, Metro Tech must pay a trucking cost of $500 for each
delivery regardless of the total number of components in the order. Currently, all three items
are being ordered independently using EOQ models. A proposal has been made to combine the
ordering of the three items to save on trucking costs. Analyze the current and the prosed
scenario and show the results below.
Input Data:
Demand items/year
Item Cost in $/item
Holding Cost as %/year
Ordering Cost $/order
# of Orders/ year
Economic Order Quantity
Holding Cost in $/year
Ordering Cost in $/Year
Total Cost of ordering
A
Current Scenario Analysis (Independent ordering):
# of Orders/ year
Economic Order Quantity
Holding Cost in $/year
Ordering Cost in $/Year
Total Cost of ordering Jointly
A
Proposed Scenario Analysis (Joint ordering):
B
A
B
B
C
C
C
Combined Order
No Change
No Change
No Change
Total
Total
Total cost savings due to ordering jointly:
Can you estimate the total savings in trucking costs? Why is this different from total savings?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images
Recommended textbooks for you
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning