Jackie Chen, vice president of China Imports, was looking modes for various products imported from China to the United States. His basic options were to either use freight or ocean shipping in 20- much cheaper. smartphones. to design a framework to select transportation air faster and more reliable, but ocean shipping was product categories, He decided to evaluate the shipping decision for one of the most popular product categories smartphones China Imports provided a variety of products to its customers from a warehouse near the port of Long Beach, California. The company incurred a holding cost of 25 percent on all inventory
Demand for smartphones has been relatively constant for several years and is expected to start that way Weekly demand for smartphones is 1,000. Each smartphone cost $300 and weighed 0.2 pound
Air freight and ocean shipping were the two options available to move product from China to the United States. Air freight charged so.50 per pound and required a minimum shipment of 100 pounds. The delivery lead time on air freight was one week. For the delivery lead time of one week, the warehouse keeps a safety stock of 600. Ocean shipping was much cheaper and cost $1,200 per 20-foot container. Each container could hold up to 10,400 pounds. The delivery lead time using ocean shipping was nine weeks. For the delivery lead time of nine weeks, the warehouse keeps a safety stock of 1,800.
1. Suppose that Jackie Chen decides to use air freight of 100 pounds whenever he imports smartphones from China.
Compute the following quantities.
a. Number of smartphones ordered every time an order is placed
b. Average inventory level at the warehouse
c. Cost of holding one smartphone in inventory for a year at the warehouse
d. Annual cost of holding inventory at the warehouse
e. Transportation cost each time a delivery is made
f. Number of deliveries a year
g. Annual transportation cost
h. Annual inventory holding and transportation costs
2. Suppose that Jackie Chen decides to use ocean shipping with a full 20-foot container whenever he imports smartphones from China. Compute the following quantities.
3. Number of smartphones ordered every time an order is placed Average inventory level at the warehouse Cost of holding one smartphone in inventory for a year at the warehouse Annual cost of holding inventory at the warehouse Transportation cost each time a delivery is made