1. If I were Skip Grenoble, which alternative would you advise Ms. Shannon to implement? What criteria would you use to arrive at your decision?
If I were Skip Grenoble, I would advise Ms. Shannon to utilize air transportation as this would afford Senco greater flexibility and responsiveness in reacting to fluctuations in demand in a high tech industry that is characterized by short product life cycle. As a U.S based contract manufacturer of laptop and personal computers, in my opinion, Senco is providing a fairly high substitutable service. It this case, it then follows that Senco needs to provide higher customer service levels in order to gain repeat customers. Air will provide higher customer…show more content… All in all, the successful utilization of air as oppose to ocean would be a good example of sub optimization as higher costs are undertaken in exchange for greater profits gained from improved customer service.
2. At what level of demand (in pounds) per year would these two alternatives be equal?
At 1,904,761.9 pounds per year of demand these two alternatives will equal each other in total costs, with air being forecasted as being the more expensive option above this level.
3. Graphically represent the two alternatives and their tradeoff point
Tradeoff point = 1,904,761.9 POUNDS
4. Which alternative would you recommend be in place to accommodate future demand growth?
Solely taking a look at the graph, to accommodate future demand for growth I would recommend ocean transportation to move our products from the new facility in China. As we expect demand to grow by 10 percent annually over the next five years, it will be most beneficial to utilize ocean transportation as projected total costs for air becomes higher than ocean above the trade off point of 1,904,761.9 POUNDS. For example, total projected costs were calculated to be at $587,156 for air versus $630,080 for ocean at the end of 5 years. Extrapolate the graph even further into the future, with the expectation of even more growth,