A retail chain has eight stores in a region supplied from four supply sources. Trucks have a capacity of 30,000 units and cost $1,200 per load plus $100 per delivery. Thus, a truck making two deliveries charges $1,400. The cost of holding one unit in inventory at retail for a year is $0.25.

The vice president of supply chain is considering whether to use direct shipping from suppliers to retail stores or setting up milk runs from suppliers to retail stores. What network do you recommend if annual sales for each product at each retail store are 150,000 units?

You can assume the following for your analysis:

1. All trucks travel full load in a direct shipping network scenario.

2. Suppliers running milk runs to four stores on each truck.