Yadea Technologies Co. Ltd, a famous electric motorcycle manufacturer in China, has its battery assembly plant in Cixi city, Zhejiang Province and its Electric motorcycle assembly plant in Jinzai county, Anhui Province. One electric motorcycle is configured with one battery. Batteries are transported between the two plants using trucks. Each truck trip per order costs $1,000. The electric motorcycle plant assembles and sells 300 motorcycles each day. Each battery costs $500 and Yadea incurs a holding cost of 20 percent per year. (Assuming 365 operating days a year in Yadea and each truck spacious enough to accommodate the quantity of each order)

Study Questions:

(a) How many batteries should Yadea load onto each truck? What is the cycle inventory of battery at Yadea? Also please calculate its annual ordering cost, annual holding cost respectively.
(b) Yadea has decided to implement just-in-time (JIT) at the motorcycle assembly plant. As part of this initiative it has reduced the number of batteries loaded on each truck to 100. If each truck trip still costs $1,000, how does this decision impact annual costs at Yadea? What should the cost of each truck be if a load of 100 battery is to be optimal for Yadea?

Answer rating: 100% (QA)

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