The EXPORT Company has a manufacturing facility in Seattle and ships to a warehouse in Singapore. EXPORT manufactures three different widgets that are sold in Asia, the mean and standard deviation of the demand per week for these three widgets faced by the warehouse in Singapore are as follows:
|
Widget
|
Weekly Demand Mean
|
Weekly Demand Standard Deviation
|
|
A
|
100
|
50
|
|
B
|
250
|
100
|
|
C
|
500
|
250
|
The warehouse manager in Singapore is responsible for the transport costs, in transit inventory, safety stock and cycle stock in order to provide a 98 % in stock level. The widgets are shipped by sea and incur a 6 week transit time to reach Singapore from Seattle. Each unit incurs a transport cost of $ 10/unit. Orders are placed weekly and ships leave weekly from Seattle. The holding cost charged is 20 % of product cost. Each widget costs $ 250.
(a) Provide the cycle stock, safety stock, in transit inventory and transport cost across all widgets to provide the desired in stock level.
(b) A consultant suggests that the items should be shipped by air and will reach within one week. But air shipments cost $ 25/unit. What would be corresponding inventory levels and total cost if products were shipped by air from Seattle to Singapore.
(c) Another consultant suggests a redesign of the product so that one common product is made in Seattle and shipped to Singapore. At Singapore, as demand is received, this common product is customized to become widgets A or B or C as required. Assume shipment by sea with a cost of $10/unit. What will be the corresponding total cost under this scheme.