Monczka-Trent Shipping is the logistics vendor for Handfield Manufacturing Co. in Ohio. Handfield has daily shipments of a power-steering pump from its Ohio plant to an auto assembly line in Alabama. The value of the standard shipment is $250,000. Monczka-Trent has two options: (1) its standard 2-day shipment or (2) a subcontractor who will team drive over-night with an effective delivery of 1 day. The extra driver costs $175. Handfield’s holding cost is 35% annually for this kind of inventory.
(a) Which option is more economical?
(b) What production issues are not included in the data presented?