Or hold fractional units of a product and we have a

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An Introduction to Management Science: Quantitative Approach
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Chapter 10 / Exercise 5
An Introduction to Management Science: Quantitative Approach
Anderson/Sweeney
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or hold fractional units of a product and we have a projected annual demand (based on a 365 day year) of 33,500 units with a deviation in daily sales of 40 units. Our goal is to maintain an in-stock probability of 97% for our customers” replied Hazard. “All product (regardless of supplier) will be shipped by rail utilizing twenty-foot equivalent units (TEUs) to IDC’s distribution center in Alliance Fort Worth (AFW) where we will service all of IDC’s customer’s needs. A single TEU container can hold up to 1000 units of Schachtel Schmuggel Bannware. Due to the nature of the product, no other product may be loaded into the same container. IDC’s inventory carrying cost throughout the supply chain is 27.5%.” Hazard and Heskett recognize it will cost $200 to place each order with the domestic supplier and due to the complexity of international trade will cost $300 to place each order with the foreign supplier. Domestic Supplier Details One of the possible sources of supply is CousinsAg, located in Wahoo, Nebraska. The US Department of Labor reported that in 2002, 88,000 of Nebraska’s wage and salary workers are members of unions.4CousinsAg is a union shop with an average labor rate in their Wahoo, Nebraska facility of $25.30 per hour. In responding to IDC’s Request for Quote (RFQ), CousinsAg’s price is $88.00 per unit. Figure One Domestic Supply Chain As shown in Figure One, when an order is placed with CousinsAg it will take 8 days for them to process and manufacture the order, and an additional 5 days to ship it FOB Origin, Freight Collect to IDC’s Alliance Fort Worth Distribution Center. Rail shipping cost from CousinsAg to AFW is $2,100. Based on similar rail shipments from that part of the country, Hazard assumes the standard deviation of the lead time from Wahoo will be 3 days.
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An Introduction to Management Science: Quantitative Approach
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Chapter 10 / Exercise 5
An Introduction to Management Science: Quantitative Approach
Anderson/Sweeney
Expert Verified
Global Supplier Details The other possible source of supply is Dong Hai Supply, in Chengdu, Sichuan, China. Over the past decade, China aggressively developed their transportation and logistics infrastructure inland from the coast. As shown in Figure Two, the Chinese government is now actively promoting trade in areas such as Chengdu. Located 2,107 kilometers from the port of Shanghai, the Sichuan Administration of Price Control, Sichuan Department of Finance, and the Sichuan Labor Department have maintained strict wage controls to help develop manufacturing for export. The average labor rate in Chengdu is 10.36 Yuan per hour. The current exchange rate is 1 CNY China Yuan Renminbi (¥) = 0.151729 US Dollar.5In responding to IDC’s Request for Quote (RFQ), Dong Hai Supply’s price is 540 ¥ per unit. The global supply chain is shown in Figure Three. When an order is placed with Dong Hai Supply (EXW Chengdu, China) it will take 10 days for them to process, manufacture, and stuff the order into a TEU container. Dong Hai Supply will use the

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