that is sold in specialty stores in the United States. The company
uses the same engine for all five models. You have been given the
assignment of choosing a supplier for these engines for the coming
year. Due to the size of your warehouse and other administrative
restrictions, you must order the engines in lot sizes of 850 units.
Because of the unique characteristics of the engine, special
tooling is needed during the manufacturing process for which
you agree to reimburse the supplier. Your assistant has obtained
quotes from two reliable engine suppliers and you need to decide
which to use. The following data have been collected:
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select?
b-1. If you could move the lot size up to
ship in truckload quantities, calculate the total cost for each
supplier. (Do not round intermediate
calculations. Round "Required
lot size for truckload"
and final answers to
the nearest whole number.)
HINT: Use (full) truckload cost rates and the lowest
(feasible) unit cost for all calculations. For example, if there
are 8.3 orders per year, don’t split the 8.3 orders into 8 full
truckloads and 0.3 less-than-truckloads - use the full truckload
rate for all 8.3 orders. For annual purchase cost, don’t use two
different unit costs for the 8 complete orders and the 0.3 partial
orders − use the lowest (feasible) unit cost for all 8.3 purchase
orders based on the lot size needed for a full truckload.
b-2. Would your supplier selection
change?
Requirements (annual forecast) Weight per engine Order processing cost Inventory carry cost 10,200 units $ 20 pounds 160 per order 20 percent of the average value of inventory per year
ORDER QUANTITY 1 to 1,499 units/order 1,500 to 2,999 units/order 3,000+ units/order Tooling costs Distance SUPPLIER 1 UNIT PRICE 702 $ 692 682 $26,820 115 miles SUPPLIER 2 UNIT PRICE $ 700 698 681 $23,400 100 miles
Truckload (43,000 lb. each load): Less-than-truckload: $0.80 per ton-mile $1.20 per ton-mile