A firm has two suppliers for the same product to hedge against supplier uncertainties and strategic...

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A firm has two suppliers for the same product to hedge against supplier uncertainties and strategic vulnerability: a domestic/national manufacturer and an offshore/foreign manufacturer. The management wants to determine the inventory related cost parameters for these two suppliers. The accounting department estimates the following costs and expenses: (i) A cost of $2300 is incurred due to paperwork involved with each order. (ii) Items in the warehouse are insured at an annual premium of 2% of the value of the item held in stock per year. (iii) The operational expenses of the warehouse such as utilities, personnel, cleaning, temperature/humidity control etc. are estimated as $1200 per month. (iv) The firm has a cost of capital of 1 % per month. Each shipment received has to go through an incoming quality inspection which incurs a fixed cost of $210 per shipment and $1 per unit in the shipment. The domestic supplier, being geographically closer, has a constant delivery lead time of one month, whereas, the lead time for the off-shore supplier is 6 weeks. The transportation costs for a shipment from the domestic supplier has the following structure: $200 per order and $1 for each unit in the order. The transportation costs for a shipment from the foreign supplier has the following structure: $400 per order and $2.5 for each unit in the order. Each shipment from the foreign supplier needs to be cleared from the customs, which incurs an additional fixed cost of $200 and an import duty of 1% on the purchasing price. When shipments arrive at the warehouse, the trucks are unloaded by the company personnel; it takes each worker 5 minutes to unload and place 10 units of product at the warehouse. The personnel are called from an outside temporary worker company and the hourly wage for each worker is computed at $5. The outside company only charges for the labor time at this wage and also a flat fee of $100 for every order that they handle. The domestic supplier offers a unit purchasing price of $110. The foreign supplier offers a unit purchasing price of $101. The fluctuations over time in demand are considered to be small so that the annual demand that the firm faces may safely be assumed constant with a rate of 50,000 units. For convenience, assume that here are 7 days a week, 4 weeks in a month; 12 months in a year. Determine the following parameters for the domestic AND the foreign supplier. Fixed ordering cost, K for orders with the domestic supplier. Fixed ordering cost, K for orders with the foreign supplier. C. Unit holding cost, h, per year for the product obtained from the domestic supplier. Unit holding cost, h, per year for the product obtained from the foreign supplier. d. a. b. S A firm has two suppliers for the same product to hedge against supplier uncertainties and strategic vulnerability: a domestic/national manufacturer and an offshore/foreign manufacturer. The management wants to determine the inventory related cost parameters for these two suppliers. The accounting department estimates the following costs and expenses: (i) A cost of $2300 is incurred due to paperwork involved with each order. (ii) Items in the warehouse are insured at an annual premium of 2% of the value of the item held in stock per year. (iii) The operational expenses of the warehouse such as utilities, personnel, cleaning, temperature/humidity control etc. are estimated as $1200 per month. (iv) The firm has a cost of capital of 1 % per month. Each shipment received has to go through an incoming quality inspection which incurs a fixed cost of $210 per shipment and $1 per unit in the shipment. The domestic supplier, being geographically closer, has a constant delivery lead time of one month, whereas, the lead time for the off-shore supplier is 6 weeks. The transportation costs for a shipment from the domestic supplier has the following structure: $200 per order and $1 for each unit in the order. The transportation costs for a shipment from the foreign supplier has the following structure: $400 per order and $2.5 for each unit in the order. Each shipment from the foreign supplier needs to be cleared from the customs, which incurs an additional fixed cost of $200 and an import duty of 1% on the purchasing price. When shipments arrive at the warehouse, the trucks are unloaded by the company personnel; it takes each worker 5 minutes to unload and place 10 units of product at the warehouse. The personnel are called from an outside temporary worker company and the hourly wage for each worker is computed at $5. The outside company only charges for the labor time at this wage and also a flat fee of $100 for every order that they handle. The domestic supplier offers a unit purchasing price of $110. The foreign supplier offers a unit purchasing price of $101. The fluctuations over time in demand are considered to be small so that the annual demand that the firm faces may safely be assumed constant with a rate of 50,000 units. For convenience, assume that here are 7 days a week, 4 weeks in a month; 12 months in a year. Determine the following parameters for the domestic AND the foreign supplier. Fixed ordering cost, K for orders with the domestic supplier. Fixed ordering cost, K for orders with the foreign supplier. C. Unit holding cost, h, per year for the product obtained from the domestic supplier. Unit holding cost, h, per year for the product obtained from the foreign supplier. d. a. b. S

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a To determine the fixed ordering cost for the domestic supplier we need to consider the cost of pla... View the full answer