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Wholesale Building Materials ( WBM ) plans to enter Florida market during the next fiscal year. The company has already decided a product line that
Wholesale Building Materials WBM plans to enter Florida market during the next fiscal year. The company has already decided a product line that they will introduce to the FL market. WBMs plan is to serve FL from a DC located in Houston, TX As an initial market entrance strategy, WBM has signed a vendor managed inventory VMI contract with a company in FL According to the contract WBM needs to bring of the total demand during each inventory replenishment cycle ie shipment size is of the total demand in addition an amount equal to the replenishment quantity will be kept as the average inventory in Houston against contingencies. The expected demand in the market will be a function of time responsiveness of WBM The demand function is defined as follows:
DT
Where D is demand per year in terms of normalized units and T in days is the response time for a certain mode of transportation. Cost of each product is $ in TX inventory holding rate per unit per year is transportation cost is paid to the transportation company after items are delivered to FL and sales price of each item in FL is assume all units brought to FL will be sold Find what mode of transportation should be chosen to maximize the companys first year profit. Use two decimal place accuracy for cost eg and round shipment quantity to the nearest integer points
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