Harley-Davidson has its engine assembly plant in Milwaukee and its motorcycle as

Question

Harley-Davidson has its engine assembly plant in Milwaukee and its motorcycle assembly plant in Pennsylvania. Engines are transported between the two plants using trucks, with each trip costing $800. The motorcycle plant assembles and sells 360 motorcycles each day. Each engine costs $500, and Harley incurs a holding cost of 20% per year. Assume that Harley has 365 operating days.

a) How many engines should Harley load onto each truck? What is the cycle inventory of engines at Harley?

b) What are the annual holding cost and annual ordering cost for the engines at Harley, respectively?

c) What is the average flow time (in days, carry two decimal places) for the engines at Harley?

Explanation / Answer

Daily demand= 360 motorcycles

Annual demand(D)=daily demand * no. of operating days in a year

=360*365

=131400.

transportaion cost(T)=800.

cost per engine(C)=500

holding cost(h)= 20%.

a) No. of engines Harley should load(Q)=SQRT((2*D*T)/(20%*500))

=1296.89 engines.

cycle inventory of engines at harley=Q/2

=1296.89/2

=648.45

b) The annual holding cost=(Q/2)h*c

=(648.45)*0.2*500

=$64845.

the annual ordering cost=(D/Q)*T

=(131400/1296.89)*800

=$81055.45.

c)average flow time=Q/D

=1296.89/131400

= 0.0097 days

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