One of the products of Computech Inc., a computer peripheral equipment manufacturer, is a heavy duty color laser printer for office use, which are manufactured in a factory in Cleveland, OH. The production of the toner cartridges for these printers, however, is outsourced to a company located in Buffalo, NY, at a contracted price of $22 per cartridge. Computech’s ordering policies for all purchased components are based on continuous review inventory control, with an inventory holding cost rate of 30% (i.e. $0.30/$/year), an order processing cost of $20/order and a 98% cycler service level. It is estimated that the average annual usage of these toner cartridges at the Cleveland plant would be 120,000 units per year, with a standard deviation of 4,000 units. The purchase contract for the toner cartridges stipulates that Computech takes ownership of inventory when these are loaded on a transport vehicle at Buffalo for shipment to Cleveland. Currently, for shipping this item to Cleveland, Computech uses LTL motor carriers on an ad hoc basis, resulting in an average variable transportation cost of $0.19 per cartridge shipped, an average delivery lead time of 4 days and a standard deviation of 1.2 day.
In order to improve its logistics function efficiency, Computech is negotiating with Total Trucks, a 3PL service provider in the common motor carrier industry, for shipping the cartridges from their source to the Cleveland plant. Total Trucks has offered Computech two shipping options: (1) full truckload (TL) shipments of 30,000 cartridges at a fixed delivery cost of $4,500 per shipment, or (2) less-than-truckload (LTL) transportation at variable costs of $0.20/unit for shipment quantities of up to 6,000 units, $0.18/unit for quantities exceeding 6,000, up to 12,000 units and $0.16/unit for quantities over 12,000 units. From an analysis of Total Truck’s intercity delivery performance data over the past year, Computech estimates that the average delivery lead time for TL shipments would be 2 days, with a standard deviation of 1 day. For LTL transportation, the same performance metrics for Total Trucks would be 3 days and 1 day, respectively.
Compute Computech’s current annual total relevant logistics cost. This means using the LTL motor carriers on the ad hoc basis.
Please provide all Excel workbooks and formulas.