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Supply Chain: AutoPart Freq. of Deliveries & Inventory Level

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Solution Summary

This solution addresses a case in which AutoPart has a warehouse and shipping costs are outlined. It addresses frequency of deliveries, inventory levels, and carrying costs. There is a detailed answer as well as an answer limited to 150 words.

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Here is the expanded response:

Auto Part

A) Separate truck for each supplier:

SHIPPING AND ORDERING COSTS
You would order 1,200 units per order to fill the truck. 3,000 units (annual need) divided by 1,200 (truckload max) is 2.5 trucks (orders) per year. That's one order every 4.8 months.
Order and Shipping costs for 2.5 orders per year would be ($800 x 2.5) for the shipping plus ($100 x 2.5) for the single pickup at the supplier plus ($100 x 2.5) for the single order cost.
Total annual shipping and order cost for each supplier is $2,500.

HOLDING COST at 20%
Assuming perfect delivery timing, you get 1200 and in and it dwindles down to zero before your next delivery, your average inventory will be 600 units. Average annual inventory will be 600 unites times $50 = $30,000. $30,000 times 20% = $6,000 in ...

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Sally Baldwin, Ed.D
Education
  • BA, University of Southern California
  • MSS, United States Sports Academy
  • Ed.D, Boise State University
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