Question
Auto Parts Co. receives a specific automobile part from two sources; Supplier A and Supplier B (both suppliers provide the same automobile part). The demand
Auto Parts Co. receives a specific automobile part from two sources; Supplier A and Supplier B (both suppliers provide the same automobile part). The demand for this part in the next 4 months is as follows: 215, 260, 190, and 220. The cost of procuring the auto part from each supplier is different and it also depends on the month it is ordered and received (assume no significant lead time, i.e. Auto Parts can receive the item as soon as it is ordered). The costs of procurement from Supplier A are $18, $17, $20, and $25 for the next four month, respectively. These costs are $20, $15, $18, and $24 in the next four months, respectively, to order the automobile part from Supplier B.
In addition, Auto Parts has the option to procure more of the automobile part and keep the surplus in storage to use towards meeting the demand of future months. The cost of storage per automobile part per month is $7 for the first two months and that cost is $8 for each of the months 3 and 4. What is the best plan to optimize incurred costs while satisfying the demand? (You just need to formulate this problem using the classic structure of an OR problem, and there is no need to determine the optimal solution.)
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