Recently, Abercrombie & Fitch ( A& F) began shift-ing a large portion of its Asian deliveries to the U. S. from air freight to slower but cheaper ocean freight. Shipping costs have been cut dramatically, but shipment times have gone from days to weeks. In addition to having less control over inventory and being less responsive to fashion changes, the holding costs have risen for the goods in transport. Meanwhile, Central America might offer an inexpensive manufacturing alternative that could reduce shipping time through the Panama Canal to, say, 6 days, compared to, say, 27 days from Asia. Suppose that A& F uses an annual holding rate of 30%. Suppose further that the product costs $ 20 to produce in Asia. Assuming that the transportation cost via ocean liner would be approximately the same whether coming from Asia or Central America, what would the maximum production cost in Central America need to be in order for that to be a competitive source compared to the Asian producer?
Answer to relevant QuestionsWhat is meant by “service level”?Matthew Liotine’s Dream Store sells beds and assorted supplies. His best- selling bed has an annual demand of 400 units. Ordering cost is $ 40; holding cost is $ 5 per unit per year. a) To minimize the total cost, how many ...Using the information in Problem 13.3, develop plan B. Produce at a constant rate of 1,400 units per month, which will meet minimum demands. Then use subcontracting, with additional units at a premium price of $ 75 per unit. ...A large St. Louis feed mill, Robert Orwig Processing, prepares its 6- month aggregate plan by forecasting demand for 50- pound bags of cattle feed as follows: January, 1,000 bags; February, 1,200; March, 1,250; April, 1,450; ...Using your answers for the lot sizes computed in Problems 14.17, 14.18, and 14.19, which is the best technique and why?
Post your question