Decision Analysis Task 2 Essay

897 Words Mar 7th, 2015 4 Pages
Shuzworld Task 2
Charlene Taylor
WGU 000345193

Shuzworld Task 2
I was asked to provide a distribution pattern that minimizes shipping costs and provides adequate availability and demand. I used transportation modeling to solve this problem. Transportation modeling is “an interactive procedure that finds the least costly means of moving products from a series of sources to a series of destinations” (Heizer & Render, 2011). This tool is used to determine the best distribution pattern for multiple locations. It is best for this problem because it allows for us to determine how many products can be held at each location to give Shuzworld the lowest shipping costs. The original setup had an optimal shipping cost of $13,600. It had 1300
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Machine 1 had a reliability of 84%, Machine 2’s reliability was 91%, and Machine 3 had a reliability of 99%. The first possible setup, and ultimately the recommended setup, was to backup Machine 1. This led to an overall reliability of 84%. Backing up Machine 2 only gave a reliability of 82%. Backing up Machine 3 only gave a reliability of 76%. Therefore the recommendation is to backup Machine 1 and increase the reliability to 88%. The next task is to provide the optimum number of shoelaces to order, using appropriate cost balancing. The economic order quantity (EOQ) is the order amount that allows for an optimum level of materials at the lowest cost possible. There is a demand ofr 300,000 shoelaces per year. The setup cost is $125 per order. There is a $.10 holding cost per unit. The optimal order quantity recommended is 27,386.13 shoelaces per order, with a maximum inventory of 27,386.13. This means that we will order just the amount of shoelaces needed to fulfill current production orders. The average inventory is 13,693.06 shoelaces. There will be approximately 10.95 orders per year. The annual setup cost is $1,369.31, and the annual holding cost is $1,369.31. This makes the total cost per year $2, 738.61. This decision tool allows us to calculate the correct amount needed per order to ensure that we are lowering operating and holding costs, while keeping production properly stocked. The last task was to

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