Question
The Burdell Wheel and Tire Company assembles tires on wheel rims for use on cars during the manufacture of vehicles by the automotive industry. Burdell
The Burdell Wheel and Tire Company assembles tires on wheel rims for use on cars during the manufacture of vehicles by the automotive industry. Burdell wants to locate a low-cost supplier for the tires he uses in his assembly operation. The supplier will be selected based on the total annual cost to supply Burdell's needs. Burdell's annual requirements are for 25,000 tires, and the company operates 250 days a year. The following data is available for the two suppliers being considered.
SUPPLIER | SHIPPING QUANTITY PER SHIPMENT | Annual SHIPPING COSTS | PRICE / TIRE (p) | INVENTORY HOLD COSTS (H) | LEAD TIME (DAYS) | Annual ADMIN. COSTS |
LEXINGTON TIRE | 2,000 | $18,000 | $30 | $6.00 | 6 | $15,000 |
IRMO AUTO | 1,000 | $25,000 | $29 | $5.80 | 4 | $18,000 |
Using the Total Cost Analysis for Supplier Selection, which supplier should Burdell choose? Provide details to justify your answer. The total costs are calculated as the sum of material costs, freight (shipping) costs, inventory costs, and administrative costs.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started