Concept explainers
To determine: Which shipping alternative would be most economical.
Introduction: Supply chain defined as a sequence of associations, their offices, capacities, and actions that are engaged with manufacturing and conveying a product or administration. The chain starts with essential providers of raw materials and stretches out the distance to the last client. The supply chain fragment required with getting the completed item from the producer to the purchaser is known as distribution channel.
A supply chain is a sequence starts with essential providers or raw materials and stretches out the distance to an item or administration. No business association can exist without the two operations and supply chain.
Answer to Problem 2P
Explanation of Solution
Given:
It is given that the total boxes to ship is 80 boxes with price per box is $200 and holding costs are 30% of price per box. The overnight expense of overnight alternative is $300 two-day alternative is $260 and six-day alternative is $180.
Calculate the holding cost of overnight shipping with six-day shipping:
It is calculated by multiplying the price per box with total boxes and the result is multiplied with percentage of holding costs.
Calculate the incremental holding cost of six-day shipping with overnight shipping:
It is calculated by multiplying the holding cost with total units and subtracting the days of interval between the two alternatives and multiplying the result with the total units to be shipped and the whole result is divided by 365 days. The overnight shipping consists of one day.
Calculate the net savings from using six-day shipping:
It is calculated by subtracting the shipping expense of overnight shipping alternative with six-day shipping alternative and the result is subtracted to incremental holding cost.
Hence, the net savings of six-day shipping alternative is $54.25.
Calculate the incremental holding cost of six-day shipping with two-day shipping:
It is calculated by multiplying the holding cost with total units and subtracting the days of interval between the two alternatives and multiplying the result with the total units to be shipped and the whole result is divided by 365 days.
Calculate the net savings from using six-day shipping:
It is calculated by subtracting the shipping expense of two-day shipping alternative with six-day shipping alternative and the result is subtracted to incremental holding cost.
The net savings of six-day shipping alternative is higher than the two-day and overnight shipping alternatives.
Hence it is recommended that the six-day shipping alternative should be selected.
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Chapter 15 Solutions
OPERATIONS MANAGEMENT (LL) >CUSTOM<
- Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. As the Marketing Manager for Southeastern Corrugated, what would you do upon receiving the request for quotation from Coastal Products?arrow_forwardAssume the demand for a companys drug Wozac during the current year is 50,000, and assume demand will grow at 5% a year. If the company builds a plant that can produce x units of Wozac per year, it will cost 16x. Each unit of Wozac is sold for 3. Each unit of Wozac produced incurs a variable production cost of 0.20. It costs 0.40 per year to operate a unit of capacity. Determine how large a Wozac plant the company should build to maximize its expected profit over the next 10 years.arrow_forwardYou are in charge of purchases at the student-run used-book supply program at your college, and you must decide how many introductory calculus, history, and marketing texts should be purchased from students for resale. Due to budget limitations, you cannot purchase more than 700 of these textbooks each semester. There are also shelf-space limitations: Calculus texts occupy 2 units of shelf space each, history books 1 unit each, and marketing texts 5 units each, and you can spare at most 1,200 units of shelf space for the texts. If the used book program makes a profit of $20 on each calculus text, $8 on each history text, and $16 on each marketing text, how many of each type of text should you purchase to maximize profit?arrow_forward
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Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,
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