Operations Management: Processes and Supply Chains (11th Edition)
11th Edition
ISBN: 9780133872132
Author: Lee J. Krajewski, Manoj K. Malhotra, Larry P. Ritzman
Publisher: PEARSON
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Question
Chapter 14, Problem 1P
Summary Introduction
Interpretation: The shipping quantity and the supplier are to be determined that can provide the lowest total cost for the company.
Concept Introduction: The Company manufactures cell phones, exclusive for its network. In order for its new make, the company is to select a supplier of the circuit board. While the annual requirement of these components is 50,000 units, the manufacturing plant operates 250 days per year. There are three suppliers available with different options.
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Bradley Solutions and Alexander Limited are two well-established suppliers of inexpensive tools.
Meanwhile, Weekend Projects is a national chain of retail outlets and wants to find a supplier for a
particular tool set that promises to be a big seller. Expected annual sales are 100,000 units (D).
Weekend's warehouses operate 50 weeks a year. Management collected data on the two suppliers,
which are contained in the table below:
Annual Freight
Costs Shipping
Quantity (Q)
Annual
Lead
Annual
Supplier
20,000
40,000 Price/unit(p)
Administrative
Holding
Cost/Unit(H) (L)(wks)
$1.5
$1.8
Time
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Bradley $30,000 $20,000
Alexander $25,000 $22,000
$6
$5
$20,000
$30,000
4
What is the total annual cost for Weekend Projects if the company chooses Alexander as the
supplier and determines the shipping quantity at 40,000 units per shipment?
$608,600
O $609,600
$606,600
O $607,600
Horizon Cellular manufactures cell phones for exclusive use in its communication network. Management must select a circuit board supplier for a new phone soon to be introduced to the market. The annual requirements (D) are 40,000 units and Horizon's plant operates 250 days per year. The data for three suppliers are in the attached table.
Annual Freight Costs
Shipping Quantity (Q)
Supplier
10,000
20,000
Price/Unit (p)
Annual Holding Cost/Unit (H)
Lead Time (L) (days)
Annual Administrative Cost
Material Costs
Abbott
$11,000
$8,500
$29
$5.80
4
$11,000
$232,000.00
Baker
$12,000
$9,500
$31
$6.20
3
$12,000
$1,240,000
Carpenter
$9,000
$7,000
$28
$5.60
8
$9,000
$1,120,000
Which supplier and shipping quantity will provide the lowest total cost for Horizon Cellular? Using the supplier [X] and a shipping quantity of [X] units is the lowest cost alternative, with annual total costs to Horizon Cellular of [X]. (Quantity and Annual Total Costs are integer…
Alison's Accessories is a high volume worldwide fashion house with outlets in 65 countries. Sadly, space does not permit an exhaustive list but once the test is over, check out their website. Kalil, the supply chain manager is conducting her usual thorough analysis of her final four candidates for supplier and has developed the following tables of pertinent costs and other shipping metrics. Regardless of supplier, Alison's Accessories will operate 220 days per year and has forecast annual demand of 250,000 units. Kalil has obtained quotes for three different shipment sizes (Freight Costs table). All costs are in US Dollars.
Table 1
Unit costs
Supplier Price/Unit Carrying Cost
A 123 22
B 125 19
C 126 18
D 100 40
Annual Freight Costs
Supplier 15,000 units 25,000 units 50,000 units
A 380,000 260,000 237,000
B 615,000 547,000 470,000
C 285,000 240,000 200,000
D 380,000 260,000 237,000
Other Costs
Supplier Lead Time Annual Admin Costs
A 30 250,000
B 15 275,000
C 7 225,000
D 90…
Chapter 14 Solutions
Operations Management: Processes and Supply Chains (11th Edition)
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