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A retiree and amateur woodworker has been contracted to make a small wooden souvenir for sale at the Gift Shop of the local Visitor's Center.
A retiree and amateur woodworker has been contracted to make a small wooden souvenir for sale at the Gift Shop of the local Visitor's Center. The items are small/lightweight so primary cost of shipping is the fixed cost of a trip across town. Other relevant data for the Gift Shop are:
- Quarterly Demand = 1200 units
- Ordering (shipping) cost = $12 per order (basically cost of loading a pickup truck and gas for round trip drive)
- Holding cost = $0.25 per unit per year (low becoz it is simply cost of storing souvenirs in the basement of retiree's house)
- At first the Gift Shop doesn't care when deliveries occur. In this scenario, what is the Optimum Delivery strategy for the retiree?
- Under this scenario what is the Optimum Quantity, Ordering Cost, Holding Cost and Total Cost
- After some time, the Gift Shop gets tired of receiving shipments at different times from all vendors. All vendors are asked to start making deliveries once a month in the second scenario. How would this requirement change the Quantity of each order, Ordering Cost, Holding Cost and Total Cost?
- Based on this second scenario, should the retiree agree to the new delivery terms?
- if all vendors make deliveries once a week, then there is no need to use a back room to store (potentially repurposing the space for more valuable use). Consequently, in Scenario 3, all suppliers are asked to make deliveries once a week.What is the new Delivery Quantity, Ordering Cost, Holding Cost and Total Cost?
- Should the retiree accept the new delivery terms?
- What does this tell you about the pros and cons of JIT?
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