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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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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.

\$2.19