A Pet Company has 12 retail stores receiving major products from 6 different suppliers. Shipments are fulfilled by trucks with a capacity of 60,000 units of products. Each load costs $1,200 to transport and $150 to deliver. The cost of holding one unit of product in the inventory is $0.40. Each order costs transportation and delivery costs plus $300. Annual sales forecast for each product is 600,000 units.

SCENARIO 1 Supply Chain Department (SCD) decides to use direct shipping from suppliers to retail stores. SCD wants you to calculate the Economic Order Quantity (EOQ) and order in that quantity if EOQ is smaller than the truck capacity. If EOQ is bigger than the truck capacity, the order will be equal to the truck capacity. Calculate the total holding and truck costs.

SCENARIO 2 Supply Chain Department (SCD) decides to set up milk runs from suppliers to 6 stores at a run. In this scenario, SCD will use the full capacity of the trucks regardless of the EOQ. Calculate the total holding and truck costs. Analyze whether there are any options that would bring cost savings compared to 6 deliveries per run.