Consider a retail store importing unlocked smart phones from overseas. The monthly demand for phones is 100. The store carries half the lead time demand as safety inventory. Each phone costs $450 and the annual holding cost is estimated at 20% of phone value. Assume that the retail store owns the pipeline inventory and that there are 30 days per month.

The manufacturer of the phones offers two different shipment options:

i. Ocean freight: Each container carries 500 phones and the cost is $2000 per container. The delivery lead time for this option is 30 days.

ii. Air freight: The total annual cost (inventory + transportation) of this option is $20,000.

If cost is the only criterion for the store, which transportation option should they choose?

Is your answer to part (a) likely to change if the product in question were a toy that cost $10 per unit? Please answer this question qualitatively without solving the problem again.

Consider a company that has 32 retail stores and each retail store sells product from 8 different suppliers. At each retail store, the demand for each supplier’s product is 50,000 pounds per year. The company is planning to use large trucks with milk runs to handle transportation from suppliers to retail stores. Each truck can carry 40,000 pounds. The cost of a truck is $1000 plus $150 per delivery (i.e., each milk run stop costs $150). The company is planning to have 10 stops on a milk run. Assume that inventory holding cost is $1 per pound per year. Please compute the annual transportation plus inventory holding cost (just based on cycle inventory) this company will incur.

Consider a warehouse that has 300,000 cases of product in inventory. We know that they turn their inventory 4 times per year. The warehouse operates on a single 8-hour shift per day over 250 days per year. Most order picking is manual and each worker can pick 30 cases per hour. How many order pickers should the warehouse employ to maintain the desired throughput rate? Please round up your answer to the nearest integer.

Consider a supplier selling a seasonal product to a retailer at the wholesale price of $100. It costs the supplier $50 to procure the good. The retailer sells the good to the end-customer at a price of $145. Assuming the salvage value of the good is zero and the seasonal demand for the product is normally distributed with mean 200 and standard deviation 50, answer the following:

What is the optimal order quantity for the retailer in the absence of a coordinating contract?

What is the optimal buyback price the supplier needs to offer to the retailer if she wants to coordinate the supply chain?

What is the optimal order quantity for the retailer under the supply-chain coordinating buyback contract assuming the wholesale price remains at $100?