Skip Grenoble, director of logistics for Senco, was called on for his advice. "Obviously, we need to decide on whether to use ocean or air transportation to move our products from the new locations. Air transportation will cost more than ocean but will result in lower inventory costs because of the faster transit times. The opposite is true for ocean transportation. Moving products by air will also result in higher ordering costs since we will be ordering more often for replenishment for our U.S. distribution centers. Using either mode will require some fixed investment in loading and unloading facilities at both the new plant and our U.S distribution centers. Projected annual demand from the new facilityis 1.5 million pound s. However, we expect this demand to grow by 10 percent annually over the next five years, Although the air transportation system appears to be the more expensive option right now, we growth and how each mode will help us achieve our profit and need to take into consideration our goals. The relevant cost information for each alternative is presented in the following table. Table 1 Air Ocean 325,000 $ 125.000 Total Transportation Costs Inventory Costs $ 20,000 Carrying $75,000 $ 20,000 Handling $ 25,000 Ordering $ 6,000 $ 12,000 $ 650,000 $ 450.000 Fixed Cost $876,000 Total Costs $832,000 Case Questions 1. If you were Skip Grenoble, which alternative would you advise Jim Beierlein to implement? What criteria would you use to arrive at your decision? 2. At what level of demand (in pounds) per year would these two alternatives beequal? 3. Graphically represent these two alternatives and their tradeoff point. Hint: Excel can be used to create this type of chart. If your Excel knowledge is not to a point you can use it to create the chort. it is acceptable to neatly hand-draw and label the chart and scan it into your document). 4. Which alternative would you recommend be in place to accommodate future demand growth? What additional factors should be considered