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Crunchy Inc. has hundreds of suppliers. Currently, Crunchy uses full TL (Truckload) transportation to obtain separately from each supplier. Truckload shipping costs $500 per truck and a $100 per pickup. The truck capacity is 2,000 units. Crunchy is considering the aggregation of inbound shipments to lower costs. Average annual demand from each supplier is 10,000 units. Each unit cost $100 and Crunchy incurs a holding cost of 20 percent.

a) What is the order size, frequency and the total cost (holding and ordering) for each supplier under their current policy of full truckload shipping?

b) What is the optimal order size, frequency and the total cost (holding and ordering) for each supplier if no aggregation is considered?

c) What is the optimal order size, frequency and the total cost (holding and ordering) for each supplier if five suppliers are aggregated?

Operation Management, Management Studies

  • Category:- Operation Management
  • Reference No.:- M92037481

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