Revisit the ImportHome.com case study, assume the costs of the GM soymilk maker
ID: 2570294 • Letter: R
Question
Revisit the ImportHome.com case study, assume the costs of the GM soymilk maker and GM cooker are $35 per unit. The annual inventory carrying cost is 18% of the product cost. Please answer the following questions:
1. For GM soymilk maker, calculate the annual shipping and inventory carrying costs under either full or half container. Which is better: full vs. half container?
2. For GM cooker, calculate the annual shipping and inventory carrying costs under either full or half container. Which is better: full vs. half container?
Please look at the case data table for the demand data of these products:
Month JY Soy GM Soy GM Cooker Price JY Soy Price GM Soy Price GM Cooker week 1 41 32 48 99.99 88.88 149.99 1 1 80 23 38 99.99 88.88 159.99 2 1 97 13 25 88.99 88.88 159.99 3 1 104 12 23 88.99 88.88 159.99 4 1 123 15 25 88.99 88.88 159.99 5 2 40 24 21 99.99 88.88 159.99 6 2 39 35 33 99.99 78.88 159.99 7 2 28 38 31 99.99 78.88 159.99 8 2 34 45 39 99.99 78.88 159.99 9 3 33 43 40 99.99 78.88 159.99 10 3 66 32 29 95.99 88.88 159.99 11 3 79 21 22 95.99 88.88 159.99 12 3 35 26 29 95.99 88.88 159.99 13 4 20 33 35 99.99 88.88 159.99 14 4 25 21 27 99.99 88.88 159.99 15 4 40 24 29 99.99 88.88 159.99 16 4 32 29 30 99.99 88.88 159.99 17 4 41 33 35 99.99 85.88 159.99 18 5 13 32 36 99.99 85.88 159.99 19 5 20 37 43 99.99 85.88 159.99 20 5 14 42 49 99.99 85.88 159.99 21 5 39 22 31 99.99 88.88 159.99 22 6 16 23 29 99.99 88.88 159.99 23 6 53 12 22 95.99 88.88 159.99 24 6 36 14 28 95.99 88.88 159.99 25 6 35 12 31 95.99 88.88 159.99 26 7 43 13 26 95.99 88.88 159.99 27 7 18 23 34 99.99 88.88 159.99 28 7 31 27 37 99.99 88.88 159.99 29 7 22 21 32 99.99 88.88 159.99 30 7 48 25 34 99.99 88.88 159.99 31 8 55 29 53 95.99 88.88 149.99 32 8 51 26 48 95.99 88.88 149.99 33 8 64 31 55 95.99 88.88 149.99 34 8 73 34 59 95.99 88.88 149.99 35 9 34 16 23 99.99 88.88 159.99 36 9 35 21 25 99.99 88.88 159.99 37 9 41 24 29 99.99 88.88 159.99 38 9 21 17 29 99.99 88.88 159.99 39 9 55 21 25 95.99 88.88 159.99 40 10 47 28 29 95.99 85.88 159.99 41 10 38 29 36 95.99 85.88 159.99 42 10 35 25 39 95.99 85.88 159.99 43 10 22 32 42 99.99 85.88 159.99 44 11 36 23 36 99.99 88.88 159.99 45 11 48 12 28 89.99 88.88 159.99 46 11 54 16 39 89.99 88.88 159.99 47 11 53 32 45 89.99 80.88 159.99 48 12 56 28 42 89.99 80.88 159.99 49 12 64 27 49 89.99 80.88 159.99 50 12 66 29 52 89.99 80.88 159.99 51 12 87 24 51 89.99 80.88 159.99 52 12 98 21 49 89.99 80.88 159.99 53Explanation / Answer
Month
GM Soy
Shipping cost
Total(monthly) shipping cost
Shipping damage received per annum
Total(yearly) shipping cost
Total annual demand
1335
1
95
$15
$1,425
$18,000
$20,025
Standard deviation of Demand (monthly) = SD
26.72
2
142
$15
$2,130
We are not given information for shipping distribution in US and Canada, so we will take $15 as shipping cost per item assuming the distribution of shipping to US and Canada as 50:50.
Also assume the shipping damage charge is $1500 per month
Ordering cost (Full) = S1
3300
3
122
$15
$1,830
Ordering cost (Half) = S2
2300
4
140
$15
$2,100
Shipping cost per item (US)
$10
5
133
$15
$1,995
Shipping cost per item (Canada)
$20
6
49
$15
$735
Effective Shipping cost per annum
$2,025
7
109
$15
$1,635
Order quantity (Full) = Q1
1400
8
120
$15
$1,800
Order quantity (half) = Q2
700
9
99
$15
$1,485
Lead time (in months) = L
2
10
114
$15
$1,710
Z (assuming 5% chance of stockout)
1.645
11
83
$15
$1,245
Safety Stock (SS)
Z.SD.sqrt(L)
62
12
129
$15
$1,935
Average inventory level (based on full container)
AIL1 = (Q1)/2 + SS
762
Average inventory level (based on half container)
AIL2 = (Q2)/2 + SS
412
Conclution : Half container is better as the total relevant cost is less in this case
Carrying cost per unit (18% of $35)
h
$6.3
Carrying cost (Total) for full container
ICC1 = h*AIL1
$4,801.6
Carrying cost (Total) for half container
ICC2 = h*AIL2
$2,596.6
Total ordering cost per annum for full container
OC1 = (D/Q1)*S1
$3,146.8
Total ordering cost per annum for half container
OC2 = (D/Q2)*S2
$4,386.4
Total Relevant Cost for full container
ICC1+OC1
$7,948.4
Total Relevant Cost for half container
ICC2+OC2
$6,983.0
Month
GM Cooker
Shipping cost
Total(monthly) shipping cost
Shipping damage received per annum
Total(yearly) shipping cost
Total annual demand
1874
1
159
$15
$2,385
$18,000
$28,110
Standard deviation of Demand (monthly) = SD
38.54
2
124
$15
$1,860
We are not given information for shipping disribution in US and Canada, so we will take $15 as shipping cost per item assuming the distribution of shipping to US and Canada as 50:50.
Also assume the shipping damage charge is $1500 per month
Also assume that the container can contain max 1400 cookers as in case of Soymakers
Ordering cost (Full) = S1
3300
3
120
$15
$1,800
Ordering cost (Half) = S2
2300
4
156
$15
$2,340
Shipping cost per item (US)
$10
5
159
$15
$2,385
Shipping cost per item (Canada)
$20
6
110
$15
$1,650
Effective Shipping cost per annum
$10,110
7
163
$15
$2,445
Order quantity (Full) = Q1
1400
8
215
$15
$3,225
Order quantity (half) = Q2
700
9
131
$15
$1,965
Lead time (in months) = L
2
10
146
$15
$2,190
Z (assuming 5% chance of stockout)
1.645
11
148
$15
$2,220
Safety Stock (SS)
Z.SD.sqrt(L)
90
12
243
$15
$3,645
Average inventory level (based on full container)
AIL1 = (Q1)/2 + SS
790
Average inventory level (based on half container)
AIL2 = (Q2)/2 + SS
440
Conclusion : Half container is better as the total relevant cost is less in this case
Carrying cost per unit (18% of $35)
h
$6.3
Carrying cost (Total) for full container
ICC1 = h*AIL1
$4,974.9
Carrying cost (Total) for half container
ICC2 = h*AIL2
$2,769.9
Total ordering cost per annum for full container
OC1 = (D/Q1)*S1
$4,417.3
Total ordering cost per annum for half container
OC2 = (D/Q2)*S2
$6,157.4
Total Relevant Cost for full container
ICC1+OC1
$9,392.2
Total Relevant Cost for half container
ICC2+OC2
$8,927.3
Month
GM Soy
Shipping cost
Total(monthly) shipping cost
Shipping damage received per annum
Total(yearly) shipping cost
Total annual demand
1335
1
95
$15
$1,425
$18,000
$20,025
Standard deviation of Demand (monthly) = SD
26.72
2
142
$15
$2,130
We are not given information for shipping distribution in US and Canada, so we will take $15 as shipping cost per item assuming the distribution of shipping to US and Canada as 50:50.
Also assume the shipping damage charge is $1500 per month
Ordering cost (Full) = S1
3300
3
122
$15
$1,830
Ordering cost (Half) = S2
2300
4
140
$15
$2,100
Shipping cost per item (US)
$10
5
133
$15
$1,995
Shipping cost per item (Canada)
$20
6
49
$15
$735
Effective Shipping cost per annum
$2,025
7
109
$15
$1,635
Order quantity (Full) = Q1
1400
8
120
$15
$1,800
Order quantity (half) = Q2
700
9
99
$15
$1,485
Lead time (in months) = L
2
10
114
$15
$1,710
Z (assuming 5% chance of stockout)
1.645
11
83
$15
$1,245
Safety Stock (SS)
Z.SD.sqrt(L)
62
12
129
$15
$1,935
Average inventory level (based on full container)
AIL1 = (Q1)/2 + SS
762
Average inventory level (based on half container)
AIL2 = (Q2)/2 + SS
412
Conclution : Half container is better as the total relevant cost is less in this case
Carrying cost per unit (18% of $35)
h
$6.3
Carrying cost (Total) for full container
ICC1 = h*AIL1
$4,801.6
Carrying cost (Total) for half container
ICC2 = h*AIL2
$2,596.6
Total ordering cost per annum for full container
OC1 = (D/Q1)*S1
$3,146.8
Total ordering cost per annum for half container
OC2 = (D/Q2)*S2
$4,386.4
Total Relevant Cost for full container
ICC1+OC1
$7,948.4
Total Relevant Cost for half container
ICC2+OC2
$6,983.0
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.