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An electronics manufacturer ships partially assembled circuit boards ( hereafter called units ) from an assembly plant in Jorda Hide image transcript An electronics manufacturer

An electronics manufacturer ships partially assembled circuit
boards (hereafter called units) from an assembly plant in Jorda
Hide image transcript
An electronics manufacturer ships partially assembled circuit boards (hereafter called units) from an assembly plant in Jordan to a distribution center in UK. We want to determine which transportation mode is lower in terms of total shipping cost. There are two options for shipping, the first is to ship in 40ft containers by ocean carriers or in airline containers by air carriers. Shipment by ocean costs $10,000 per container, and a 40ft container can hold 4,500 units. The handling cost is $1,500 per 40ft container. The journey by sea takes 20 days on average. Shipment by air costs $20,000 per container, and an airline container can hold 1,400 units. The handling cost is $800 per airline container. The journey by air takes 2 days on average (door to door). The forecasted demand is 120,000 units for the next year, which is also the planned production quantity. No safety stock is kept at the assembly plant, and a shipment is sent to the distribution center as soon as a container is filled. Safety stock of 800 units is kept at the distribution center. A unit is valued at $500 at the assembly plant and $700 at the distribution center. The inventory holding cost rate is estimated at 15% of the value per year. The space cost is estimated as $30/unit*year at the assembly plant and $40/unit*year at the distribution center. Which transportation mode is more economical in terms of total annual (transportation and inventory) cost?(Show your work for all cost elements and find the optimum shipment size). In the blank below, fill in the optimal shipment size for the ocean mode (round to the nearest integer).

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