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    Analyzing the shipping alternatives

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    Monczka-Trent Shipping is the logistics vendor for Handfield Manufacturing Co. in Ohio. Handfield has daily shipments of a power-steering pump from its Ohio plant to an auto assembly line in Alabama. The value of the standard shipment is $250,000. Monczka-Trent has two options: (1) its standard 2-day shipment or (2) a subcontractor who will team drive overnight with an effective delivery of one day. The extra driver costs $175. Handfield's holding cost is 35% annually for this kind of inventory.

    a) Which option is more economical?
    b) What production issues are not included in the data presented?

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    Solution Preview

    a) Which option is more economical?
    Value of shipment=$250,000
    Annual holding cost=250000*35%=$87,500
    Holding cost per day=87500/365=$239.73
    We are able to save 1 day in case of one day ...

    Solution Summary

    This solution analyzes the given shipment alternatives.