Harley Davidson purchases components from three suppliers. Components purchased
ID: 2474505 • Letter: H
Question
Harley Davidson purchases components from three suppliers. Components purchased from Supplier A are priced at $ 5 each and used at the rate of 206700 units per year. Components purchased from Supplier B are priced at $ 4 each and are used at the rate of 25,000 units per year. Components purchased from Supplier C are priced at $ 5 each and used at the rate of 10,000 units per year. Currently Harley purchases a separate truckload from each supplier. As part of its JIT drive, Harley has decided to aggregate purchases from the three suppliers. The trucking company charges a fixed cost of $ 400 for the truck with an additional charge of $100 for each stop. Thus, if Harley asks for a pickup from only one supplier, the trucking company charges $ 500; from two suppliers it charges $ 600; and from three suppliers it charges $ 700. Harley incurs a holding cost of 20% (of the price) for each component. What is the minimal annual inventory cost of the new aggregate replenishment strategy ? What is the minimal annual inventory cost of the Harley’s current strategy of ordering separately from each supplier ? How much is the saving resulted ?
Explanation / Answer
Components purchased
Supplier A @ $ 5 each @ 206700 units per year = 1033500
Supplier B @$ 4 each @ 25,000 units per year. = 100000
Supplier C @$ 5 each @ 10,000 units per year.= 50000
Total = 1183500
only one supplier Charges = $ 500;
two suppliers charges =$ 600;
three suppliers charges= $ 700.
holding cost = 20%
supplier A = 1033500 @20% = 206700
supplier B = 100000 @20% = 20000
supplier C = 50000 @20% = 10000
Total = 236700
The minimal annual inventory cost of the new aggregate replenishment strategy = 1183500 + 700+ 236700 = 1420900
The minimal annual inventory cost of the Harley’s current strategy of ordering separately from each supplier =
1034000 + 100500 + 50500 + 236700 = 1421700
Saving resulted = 1421700- 1420900 =800
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.