PermaParts has three plants located in Minneapolis, MN; Buffalo, NY; and San Antonio, Texas that manufacture components A and B and C respectively for use at an assembly plant in Atlanta, GA.

Transit time from MN and NY to the plant in GA is 6 days while TX to GA is 3 days.

Demand at the GA plant is 100 units of component A, 25 units of component B, and 50 units of component C each day.

Currently, the plants ship in full truckloads, each truck has a maximum capacity of 600 components (all components are of similar size).

Holding cost for the units at the GA assembly plant and in-transit inventory is $1.25/unit/day for components A and B; $1.12/unit/day for component C.

Freight cost for a truckload is $ 1000 from NY and MN; but only $700 from TX.

(i) Provide the total logistics costs for the current system.

(ii) Suppose the full truckloads were replaced by optimum loads per shipment. What would be the total logistics cost? What would be the truck capacity utilization?

(iii) Suppose our Buffalo supplier (Product B) has a smaller truck option which carries only 200 units and costs $560 for the truck. How does this change our optimal solution and costs on part (ii).

Answer rating: 100% (QA)

i Total logistics cost for the current system holding cost at assembly plant ... View the full answer