Question 1

Global Coffee exports coffee from Brazil to all the world. John Lopez, their most recently hired talent, is in charge of reviewing the costs related to one of their biggest clients, Moonbucks, an Australian chain of coffeehouses. Moonbucks' annual demand of coffee is normally distributed with an average of 1114 containers and standard deviation of 186 containers. One container of coffee is worth $60 thousands of dollars. The company's holding charge is 18% per year and the company includes the transportation cost when calculating inventory costs. It costs $1.7 thousands of dollars to process the required paperwork to export the goods, independently of the volume shipped. The company's cycle service level target is 95%.

John noticed that Global Coffee has been exporting through the port of Santos and wants to compare if exporting through the port Rio Grande could reduce costs. It takes on average 1.7 months to transport the coffee from Santos to Moonbucks in Australia through the port of Santos. The total transportation cost of this route is $4.5 thousands of dollars per container. Similarly, it takes 2.1 months to ship the coffee through the port of Rio Grande. The transportation cost of this route is $4 thousands of dollars per container. In both scenarios the company would ship an economic order quantity of containers. Global Coffee owns the coffee until it is delivered at the Moonbucks premises.

a. What is the economic order quantity (EOQ) in containers for exporting the coffee through the port of Santos?

Round your answer to the nearest integer.

b. What is the annual cycle stock cost for exporting the coffee through the port of Rio Grande?

Give your answer in thousands of dollars and round it to the nearest integer.

Question 2

a. What is the annual safety stock cost for exporting the coffee through the port of Santos?

Give your answer in thousands of dollars and round it to the nearest integer.

b. What is the annual safety stock cost for exporting the coffee through the port of Rio Grande?

Give your answer in thousands of dollars and round it to the nearest integer.

Question 3

a. What is the annual pipeline inventory cost for exporting the coffee through the port of Santos?

Give your answer in thousands of dollars and round it to the nearest integer.

b. What is the annual pipeline inventory cost for exporting the coffee through the port of Rio Grande?

Give your answer in thousands of dollars and round it to the nearest integer.

Question 4

John suspects that the cost associated with the port of Rio Grande is underestimated. After reviewing the historical data, John noticed that the transit time varies significantly. He then estimates that it takes 2.1 months to ship the coffee through the port of Rio Grande, with a standard deviation of 0.2 months. Considering this new information:

a. What is the annual safety stock cost for exporting the coffee through the port of Rio Grande

Give your answer in thousands of dollars and round it to the nearest integer.

b. What is the annual cycle stock cost for exporting the coffee through the port of Rio Grande?

Give your answer in thousands of dollars and round it to the nearest integer.