Nittany Fans of Pennsylvania is a distributor of industrial fans used in plants,

warehouses, and other industrial facilities. Its market area encompasses most of

Pennsylvania, eastern Ohio, and New Jersey. The fans are manufactured in Wisconsin

and currently shipped to Pennsylvania via rail transportation. Stan Johnson, vicepresident

of logistics, has asked his staff to evaluate using motor carrier service to ship

the fans.

Simon Carlson, director of distribution, has collected the following information.

Annual demand: 30000 fans

Fan value (price): $5000

Inventory carrying cost (annual): 30%

Cost per order to replenish inventory: $300

In-transit inventory carrying cost: 20%

Order cycle time using rail: 5 days

Order cycle time using motor carrier: 2 days

Rail rate: $2.00 per 100 kg

Motor carrier rate: $2.50 per 100 kg

Unit weight: 150 kg per fan

Case Questions:

1. What is the EOQ for Nittany Fans in Units and weight?

2. What is the total cost of EOQ without considering transportation related costs?

3. What is the total cost for using rail transportation and total cost for using motor

carrier transportation?

4. Which alternative should Nittany use and why?