Operations Management: Processes and Supply Chains (12th Edition) (What's New in Operations Management)
12th Edition
ISBN: 9780134741062
Author: Lee J. Krajewski, Manoj K. Malhotra, Larry P. Ritzman
Publisher: PEARSON
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Chapter 12, Problem 10P
Summary Introduction
Interpretation: Keeping in mind the costs, how many packages must be shipped to successfully benefit from vertical integration into warehouse operations.
Concept Introduction: The contract with a logistics provider for warehouse and handle packages services requires $9 million under the annual fixed charges. It includes the variable costs of $15 per shipped package. The company found another warehouse that is leased at a cost of $16 million every year. The company found another package delivery services provider who would charge $6 per package delivered.
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Alison's Accessories is a high volume worldwide fashion house with outlets in 65 countries. Sadly, space does not permit an exhaustive list but once the test is over, check out their website. Kalil, the supply chain manager is conducting her usual thorough analysis of her final four candidates for supplier and has developed the following tables of pertinent costs and other shipping metrics. Regardless of supplier, Alison's Accessories will operate 220 days per year and has forecast annual demand of 250,000 units. Kalil has obtained quotes for three different shipment sizes (Freight Costs table). All costs are in US Dollars.
Table 1
Unit costs
Supplier Price/Unit Carrying Cost
A 123 22
B 125 19
C 126 18
D 100 40
Annual Freight Costs
Supplier 15,000 units 25,000 units 50,000 units
A 380,000 260,000 237,000
B 615,000 547,000 470,000
C 285,000 240,000 200,000
D 380,000 260,000 237,000
Other Costs
Supplier Lead Time Annual Admin Costs
A 30 250,000
B 15 275,000
C 7 225,000
D 90…
One of your Taiwanese suppliers has bid on a new line of molded plastic parts that is currently being assembled at your plant. The
supplier has bid $0.10 per part, given a forecast you provided of 300,000 parts in year 1; 500,000 in year 2; and 700,000 in year 3.
Shipping and handling of parts from the supplier's factory is estimated at $0.03 per unit. Additional inventory handling charges
should amount to $0.004 per unit. Finally, administrative costs are estimated at $20 per month.
Although your plant is able to continue producing the part, the plant would need to invest in another molding machine, which would
cost $10,000. Direct materials can be purchased for $0.04 per unit. Direct labor is estimated at $0.05 per unit for wages plus a 50
percent surcharge for benefits and, indirect labor is estimated at $0.013 per unit plus 50 percent benefits. Up-front engineering and
design costs will amount to $40,000. Finally, management has insisted that overhead be allocated if the parts are…
One of your Taiwanese suppliers has bid on a new line of molded plastic parts that is currently being assembled at your plant. The supplier has bid $0.10 per part, given a forecast you provided of 200,000 parts in year 1; 300,000 in year 2; and 500,000 in year 3. Shipping and handling of parts from the supplier’s factory is estimated at $0.01 per unit. Additional inventory handling charges should amount to $0.005 per unit. Finally, administrative costs are estimated at $20 per month.
Although your plant is able to continue producing the part, the plant would need to invest in another molding machine, which would cost $10,000. Direct materials can be purchased for $0.05 per unit. Direct labor is estimated at $0.03 per unit plus a 50 percent surcharge for benefits; indirect labor is estimated at $0.011 per unit plus 50 percent benefits. Up-front engineering and design costs will amount to $30,000. Finally, management has insisted that overhead be allocated if the parts are made in-house…
Chapter 12 Solutions
Operations Management: Processes and Supply Chains (12th Edition) (What's New in Operations Management)
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