anon_ch posted a question
A power plant in California uses coal at the rate of 100,000 pounds each day. It also uses MRO material at the rate of 1,000 pounds each day. The coal comes from Wyomung and the MRO material comes from Chicago. Coal costs $0.01 per pound, whereas MRO material costs $10 per pound, on average. Holding costs at the power plant are 25 percent. Transportation choices available are as follows: Train Lead Time = 15 days Carload (100,000 pounds) at $400 per carload Full train (70 cars) at $15,000 per train Truck Lead time = 4 days Minimum cost = $100 Upto 10,000 pounds at $0.08 per pound Between 10,000 and 20,000 pounds at $0.07 per pound for entire load Between 25,000 and 40,000 pounds at $0.06 per pound for entire load Small TL (40,000 pounds) for $2,000 Large TL (60,000 pounds) for $2,600 Safety inventory of coal and MRO materials is kept at twice the consumption during the lead time of supply. What mode of transport do you recommend for each of the two products? Why?