Your company manufactures toy cars for retail stores. When your customers place the order for toy cars, you use a trucking company to ship the orders to them. The trucking company publishes the following rates (per 100 pounds) Cost per 100 pounds Weight 2-Day 7-Day 0-499 lbs. $77.25 $40.50 500-999 lbs. $75.50 $38.25 1,000-1,499 lbs. $73.75 $35.75 1,500-1,999 lbs. $72.25 $32.50 2,000 lbs. or more $70.75 $30.25 (a) One of your customers ("Store 1") placed an order of 650 toy cars for the upcoming holiday season. Find the total shipment cost (shipping + transit inventory holding) for the order for 2-day shipping method and 5-day shipping method. Each toy car weighs 3 pounds and is worth $300. The annual inventory holding rate is 45%. Which shipping method should you choose? (b) Your company also received orders from two other retail stores. Store 2 placed an order of 300 toy cars, and Store 3 placed an order of 480 toy cars. Stores 1, 2, and 3 are all located in the same area and therefore the trucking company offers to consolidate the three orders into one shipment for an additional charge of $50 for each stop it is required to make. Should you consolidate if you use 5-day shipping method? (c) How would the consolidation decision from part (b) change the inventory holding cost? That is, if you decide to consolidate, how would the holding cost change compared to if you ship the orders individually (holding cost for 5- day consolidated shipment vs holding cost for 5-day individual shipments)? (d) If the value density of your shipment is lower, how would the shipping and transit inventory holding costs change? Why? Your company manufactures toy cars for retail stores. When your customers place the order for toy cars, you use a trucking company to ship the orders to them. The trucking company publishes the following rates (per 100 pounds) Cost per 100 pounds Weight 2-Day 7-Day 0-499 lbs. $77.25 $40.50 500-999 lbs. $75.50 $38.25 1,000-1,499 lbs. $73.75 $35.75 1,500-1,999 lbs. $72.25 $32.50 2,000 lbs. or more $70.75 $30.25 (a) One of your customers ("Store 1") placed an order of 650 toy cars for the upcoming holiday season. Find the total shipment cost (shipping + transit inventory holding) for the order for 2-day shipping method and 5-day shipping method. Each toy car weighs 3 pounds and is worth $300. The annual inventory holding rate is 45%. Which shipping method should you choose? (b) Your company also received orders from two other retail stores. Store 2 placed an order of 300 toy cars, and Store 3 placed an order of 480 toy cars. Stores 1, 2, and 3 are all located in the same area and therefore the trucking company offers to consolidate the three orders into one shipment for an additional charge of $50 for each stop it is required to make. Should you consolidate if you use 5-day shipping method? (c) How would the consolidation decision from part (b) change the inventory holding cost? That is, if you decide to consolidate, how would the holding cost change compared to if you ship the orders individually (holding cost for 5- day consolidated shipment vs holding cost for 5-day individual shipments)? (d) If the value density of your shipment is lower, how would the shipping and transit inventory holding costs change? Why
