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The John Equipment company that produces refrigerator engines needs to procure refrigerant gases from an external supplier. It is common that refrigerant gases are ordered
The John Equipment company that produces refrigerator engines needs to procure refrigerant gases from an external supplier. It is common that refrigerant gases are ordered and received in boxes of kg and are costly to keep in inventory. The company estimates that the inventory carrying cost of each box is equivalent to of its cost per year. Based on its target production, the company needs boxes of refrigerant gases every year. There are currently two suppliers that the company can procure its refrigerant gases from. Both suppliers sell at the same unit price of $box however they differ in their ordering and delivery policies: Supplier A that is located in Australia is a big supplier and delivers the ordered amount on the same day, and it charges $ for each order irrespective of the amount ordered. Supplier B that is located in South Islan is a fairly smaller supplier and usually do not have refrigerant gases in stock for instant delivery. It can produce and deliver only boxes per week, but it does eventually deliver the entire ordered amount. This supplier charges $ for each order irrespective of the amount ordered. Assume weeks in a year. a What are the optimal order quantity and total procurement cost if the company choose Supplier A marks b What are the optimal order quantity and total procurement cost if the company choose Supplier B marks c One of the board members of the company makes this argument that because both suppliers offer the same price, but Supplier A has lower ordering cost and it is also faster in delivering, it is the obvious choice. The company board finds this sensible Based on your calculations in parts a and b do you agree with this choice? If not, how would you justify your choice and convince the board that your choice is more sensible in simple words that the board members would understand
The John Equipment company that produces refrigerator engines needs to procure refrigerant gases from an external supplier. It is common that refrigerant gases are ordered and received in boxes of kg and are costly to keep in inventory. The company estimates that the inventory carrying cost of each box is equivalent to of its cost per year.
Based on its target production, the company needs boxes of refrigerant gases every year. There are currently two suppliers that the company can procure its refrigerant gases from. Both suppliers sell at the same unit price of $box however they differ in their ordering and delivery policies:
Supplier A that is located in Australia is a big supplier and delivers the ordered amount on the same day, and it charges $ for each order irrespective of the amount ordered.
Supplier B that is located in South Islan is a fairly smaller supplier and usually do not have refrigerant gases in stock for instant delivery. It can produce and deliver only boxes per week, but it does eventually deliver the entire ordered amount. This supplier charges $ for each order irrespective of the amount ordered.
Assume weeks in a year.
a What are the optimal order quantity and total procurement cost if the company choose Supplier A marks
b What are the optimal order quantity and total procurement cost if the company choose Supplier B marks
c One of the board members of the company makes this argument that because both suppliers offer the same price, but Supplier A has lower ordering cost and it is also faster in delivering, it is the obvious choice. The company board finds this sensible Based on your calculations in parts a and b do you agree with this choice? If not, how would you justify your choice and convince the board that your choice is more sensible in simple words that the board members would understand
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