1) One of your Taiwanese suppliers has hid on a new line of molded plastic parts that is cur­rently being assembled at your plant. The supplier has hid $0.10 per part. given a forecast you provided of 200.000 pans in year I: 300010 in year 2: and 500.000 in year 3. Shipping and handling of parts from the supplier's factory is estimated at $0.01 per unit. Additional inventory handling charges should amount to $0.005 per unit. Finally. administrative costs are estimated at $20 per month.

Although your plant is able to continue producing the pan. the plant would need to invest in another molding machine, which would cost 510.000. Direct materials can be purchased for $0.05 per unit. Direct labor is estimated at $0.03 per unit plus a 50 percent surcharge for benefits: indirect labor is estimated at $0.01 I per unit plus 50 percent benefits. Up-front engineering and design costs will amount to $30.000. Finally, management has insisted that overhead be allocated if the pans are made in-house at a rate of 100 percent of direct labor cost. The firm uses a cost of capital of 15 percent per year.

What should you do. continue to produce in-house or accept the hid from your Taiwanese supplier?

2) Your company assembles five different models of a motor scooter 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 1.000 each. 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:

Requirements (annual forecast)            12.000 units

Weight per engine                              22 pounds

Order processing cost                         5125 per order

Inventory carry cost                           20 percent of the average value of inventory per year

Note Assume that half of lot size is in inventory on average (1.000/2 = 500 units) Two qualified suppliers have submitted the following quotations:

Your assistant has obtained the following freight rates from your carrier:

Truckload (40.000 lbs. each load):             $O 80 per ton-mile

Less-than-truckload.                               $120 per ton-mile

Note Per ton-mile = 2.000 lbs per mile

a. Perform a total cost of ownership analysis and select a supplier.

b. Would it make economic sense to order in truckload quantities? Would your supplier selection change if you ordered truckload quantities?

3) The McDonald's fast-food restaurant on campus sells an zo erage of 4.()00 quaner-pound hamburgers each week. Hamburger patties arc resupplied twice a week, and on average the store has 350 pounds of hamburger in stock. Assume that the hamburger patties cost $1.00 a pound. What is the inventory turnover for the hamburger patties? On average. how many days of supply are on hand?

a. Find the solution that minimizes moving costs using Microsoft Excel.

b. What would you have to do to the costs to assure that A always sends a car to D as part of the optimal solution?

4) Sycamore Plastics (SP) is a manufacturer of polyethylene plastic pellets used as a raw mate­rial by manufacturers of plastic goods around the U.S. SP currently operates four manufac­turing centers in Philadelphia, PA; Atlanta, GA; St. Louis, MO; and Salt Lake City, UT. The plants have different capacities and production costs as indicated in the table below.

SP currently has six contract customers located in New York City; Birmingham, AL; Terre Haute, IN; Dallas, TX; Spokane, WA; and San Diego, CA. Transportation costs be­tween the plants and various customers, as well as contracted demand from each customer, are shown in the table below.

a. Create a solver model and find the optimal solution to help SP develop a distribution plan that will minimize costs to supply the customers' demand.

b. Comment briefly on your solution. Beyond the obvious, does your proposed solution have any other implications for SP?

Short Questions

1 This is the art and science of obtaining, producing, and distributing material and product in the proper place and quantities.

2 A company that is hired to handle logistics functions.

3 A mode of transportation that is the most flexible relative to cost, volume, and speed of delivery.

4 When large shipments are broken down directly into smaller shipments for local delivery.

5 Sorting goods is the main purpose of this type of warehouse.

6 A place where foreign goods can be brought into the United States without being subject to normal cus­toms requirements.

7 The main cost criterion used when a transportation model is used for analyzing a logistics network.

8 The Microsoft Excel function used to solve the trans­portation model.

9 For the transportation model to be able to find a fea­sible solution, this must always be greater than or equal to demand.

10 The "changing cells" in a transportation model rep­resent this.

11 This is a method that locates facilities relative to an X, Y grid.

12 A technique that is useful for screening potential locations for services.