Styles Assignment Fundamental Logistics Trade-Offs Cost-to-Cost Trade 1. Using Solved Problem 11.1 we can calculate the cost-to-cost trade-off: Cost @75 MPH, Distance 900 miles, EPA 6 miles per gallon, Fuel Price $5 per gallon Cost @ 55 MPH, Distance 900 miles, EPA 8 miles per gallon, Fuel Cost $5 per gallon (account for delay) Difference in cost = [] Which is less than the cost of delay (cost of delay $500). [ ] Which speed should be used? [ ] 2. Using Example 11.1 we can calculate the cost-to-cost trade-off: Cost to ship by rail, 150,000lbs, @ $0.05 per lbs (account for delay) Cost to ship by truck, 150,000lbs, @ $0.085 per lbs Difference in cost = [] Which is less than the cost of delay (cost of delay $10,000). [ ] Which mode should the company ship by? [ ] Landed Cost 3. Costs As Is Ordering Bulk Discount Ordering Unit Cost $10.00 $9.50 Unit Transport Cost $0.15 S0.15 Inventory Carrying Cost 20% 20% (percent) Ordering Cost $150.00 $150.00 Annual Demand 60,000 60,000 Ordering Quantity 5,000 15,000 After organizing the data into a table, we can now begin calculating the different costs of the status quo versus bulk ordering. As Is Ordering Bulk Discount Ordering Holding Cost (0.5 * Ordering Quantity) * Unit (0.5 * Ordering Quantity) Unit Cost * Inventory Carrying Cost Cost * Inventory Carrying Cost Ordering Cost (Annual Demand/Order Quantity) *Ordering Cost (Annual Demand/Order Quantity) *Ordering Cost Transport Cost Transport Cost * Annual Demand Transport Cost * Annual Demand Cost of Goods Unit Cost * Annual Demand Unit Cost * Annual Demand Total Landed Hold Cost + Ordering Cost + Cost Transport Cost + Cost of Goods Hold Cost + Ordering Cost + Transport Cost + Cost of Goods Which is cheaper As Is Ordering or Bulk Discount Ordering? By how much? 4. Bulk Discount Costs As Is Ordering Ordering Unit Cost $30.00 $28.00 Unit Transport Cost S0.20 $0.20 Inventory Carrying Cost (percent) 20% 20% Ordering Cost $200.00 $200.00 Annual Demand 200,000 200,000 Ordering Quantity 20,000 40,000 Using the above information, we can calculate the different costs for each option. As Is Ordering Bulk Discount Ordering Holding Cost (0.5 * Ordering Quantity) * Unit (0.5 * Ordering Quantity) * Unit Cost * Inventory Carrying Cost Cost * Inventory Carrying Cost Ordering Cost (Annual Demand/Order Quantity) *Ordering Cost (Annual Demand/Order Quantity)*Ordering Cost Transport Cost Transport Cost * Annual Demand Transport Cost * Annual Demand Cost of Goods Unit Cost * Annual Demand Unit Cost * Annual Demand Total Landed Cost Hold Cost + Ordering Cost + Transport Cost + Cost of Goods Hold Cost + Ordering Cost + Transport Cost + Cost of Goods Which is cheaper As Is Ordering or Bulk Discount Ordering? By how much
