TABLE 1 - ITEM PRICES TABLE 1 -Ocean FREIGHT RATES PROJECT DATA - AIR MODE Quest
ID: 462391 • Letter: T
Question
TABLE 1 - ITEM PRICES
TABLE 1 -Ocean FREIGHT RATES
PROJECT DATA - AIR MODE
Question: There are two primary modes of transportation available in moving the product from the supplier to your location. The base data for both modes df transportation have been provided along with the calculation of total annual landed cost. Please explain the impact of various factors in supply chain in logistics transactions in an international organization. (Hint: an explanation of your findings to demonstrate your analytical understanding of the impact of landed costing on the profitability of an organization.)
PROJECT DATA - OCEAN MODE Costing Element Variable Amount Unit of Measure annual demand = D 5,000 uints item cost = C see table #1 Freight rate = R see table #2 annual inventory carrying cost = i 25% ordering cost = O $20.00 per order penalty cost = P $5.00 per failure order failures (stock outs) F 50 in units safety stock = SS 100 units handling cost = HC $0.05 per unit warehousing cost = WC $0.10 per unit transit time = TT 25 days delivery cost = DC $1.00 per unit duties & taxes = TX 2% of the value of the goods cost of money CM 5%Explanation / Answer
The various factors having impact on supply chain costs (landed cost in this case) in an international organization are mode of shipment, Shipment size (quantity), country of import or export, duties and taxes, cost of money, season, product category, location of business, currency.
Mode of shipment affects the freight rate differently in air and sea mode. Air mode is generally used for high value, low volume consignments, and because air freight carriers follow a dynamic pricing policy. Freight rates increase with increasing volume because of limited capacity. In sea mode, freight rates decrease as the volume increases, up to the limit of full container load. Increasing the volume further may increase the freight rate, rather than decreasing it.
Sea mode is cheaper than air, but there’s a high transit time in sea, as compared to air. So there are inventory cost implications in sea mode, because of the time that the inventory remains in transit.
Customs duties and taxes depend upon the category of product and vary from country to country. So country of import/export and product category impact the supply chain cost.
Location of business determines the surface transport cost to/from port from/to origin/destination.
Shipping costs vary from time to time and pricing follow the economic principle of demand and price elasticity.
Cost of money, interest rates and currency have a significant impact on the total supply chain costs, as the high interest rates and warehousing cost add to the inventory carrying cost and high transit times add to currency risk, (more time the shipment is in transit, more are the chances of currency fluctuation). If the currency becomes expensive, then it directly affects the product cost and shipping costs.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.