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ID: 361857 • Letter: D
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doer xissx rites There will e assignmment wi accept late homewonk assigments sop ntit Wednesdey Novem deduction of 15 poins per der late ou men consuds other sudes while working on this assignment but each student IUSt in m INDINIDUUA1 cassiment Please show enough of your work so thut it can be verified you “sed the correct method of arriving at ‘"Rinswer If you have any questions, please let me know For problems in wich ou use the Excel, vou have 4 options Submit the Evcel ile with your homework 2. Ama:h screens,,ots of hc Excel file to your homework submission 3 Tpe write the information you input into Excel on your homework file te g., weights used, cost functions for plouing lines, ete). This is not to say EVERY piece of information from Excel, just enough so that I can follow your logic . Do not submit anv information regarding the templates used. In this case you run the risk of losing the majority of points for an incorrect problem. If you provide me with at least some information, Ic identify where the issue was for partial credit 1. (30 Points) A production facility needs to be supplied with two grades of steel (i.e., they have two products they purchase and must have shipped to them). Over the course of a year, the company uses 3.285.000 lbs of Grade 1 steel and 365.000 lbs of Grade 2 steel. Grade I steel costs $0.01 per lb and Grade 2 steel costs S10 per lb. NOTE: These are the costs to purchase the steel, NOT transportation cost. Holding costs at the production facility are 25% of the purchase cost per lb (ie.. each grade of steel has its own holding cost As per their contract with the supplier, the production facility owns the steel in transport and therefore the company assesses these holding costs during transportation as well. Finally, assume that any shipment you receive contains a % of grade 1 and 2 steel that is equal to their respective %s of annual demand. The production facility is reviewing a few options of transport for their steel Option 1: Ship by rail with carrier 1 In this option, one train consists of a minimum of 30 cars up to a maximum of 90 cars. Each car has a capacity of 10,000 lbs. Given the distance from the production facility to the supplier, to ship steel, it will cost $15,000 as a fixed fee for each train plus $400 per car that is on the train. This method results in a 15 day lead time Option 2: Ship by truck with carrier 2 With this carrier, you have 2 choices, each with a lead time of 5 days - Use their fleet of small trucks and ship 10,000-40,000 lbs at a time for $0.09 per lb. In addition, you will be assessed a cost of $600 per truck used. Use their fleet of large trucks and ship 40,000 to 60,000 lbs at a time for $0.06 per lb. In addition, you will be assessed a cost of $900 per truck used. a. What is the minimum cost that Option 1 can provide (include cost to transport and cost to hold b. What is the minimum cost that Option 2 can provide with the small fleet of trucks (include cost c. What is the minimum cost that Option 2 can provide with the large fleet of trucks (include cost d. What inventory)? to transport and cost to hold inventory)? to transport and cost to hold inventory)? details of each shipment and total cost). is your overall recommendation to minimize total cost? (Include mode of transport, sizeExplanation / Answer
Ans:
Option 1- Transportation cost by train
No. of railcars required for transportation of total steel of (3285000+365000) = 3650000 lbs
= 3650000 /10000 = 365
No. of rails required = 365/90 =4.05 = 5 rails
The possible capacity so that minimum and maximum railcar condition is satisfied in following way
30+90+90+90+65 =365
Cost of transportation = Fixed cost + Variable cost
= 15000x5 + 400x365 =75000+146000 =221000
Cost to hold the inventory = 0.25 x (3285000x0.01 + 365000x10 )
0.25 x ( 32850+3650000) = 920712 per annum
Daily holding cost of inventory = 920712/365 =2522
Total holding cost in option 1 = 2522x15 = 37837
Total cost in option 1 = 221000+37837 =258837
b. No. of trucks needed for transporting 3650000 lbs = 3650000/ 40000 = 91.25 = 92 trucks ( 91 with 40000 lbs + 1 with 10000 lbs)
Transportation cost = cost of truck rental + haulage cost
= 92x600+ 0.09 x3650000 = 55200+328500 = 383700
Inventory holding cost = 2522x5 = 12610
Total cost = 383700+12610 = 396310
c. No. of trucks for transporting 3650000 lbs = 3650000/60000 = 60.83 = 61
Cost of transportation = 3650000 x0.06 +900x61 =219000+ 54900 = 273900
cost of inventory holding = 2522x5 =12610
Total cost = 273900+12610 = 286510
d. Based on calculations in a, b and c, we see that the transportation by train is the cheapest. The shipment will include 365 railcars distributed among 5 rails. Total cost of transportation including inventory holding coct will be 258837.
f. It is necessary to check the weights ( Maximum and minimum) because the truck / car is being charged per unit as a part of cost of transportation, so it must be ensured that each unit is utilized to fullest to its capacity so that minimum units are hired, except the one which is partially filled. It should also not exceed the maximum limit to avoid breakdown and subsequent delay, which adds to the cost.
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