A company is examining two alternative choices for moving goods from its plant in Abu Dhabi...

 

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A company is examining two alternative choices for moving goods from its plant in Abu Dhabi to its depot in Fujairah. It has been traditionally shipping goods in full truck load (FLT) mode so as to save on transportation costs. Its finance department has been complaining about high inventories in Fujairah. A full truck load results in a shipment size of 160 units, where less than truckload (LTL) allow the firm to get lots of 40 units each. The average demand un Fujairah depot is 80 units per month. The cost of product is 500 AED per unit and the firm works with annual inventory carrying cost 20 %. Shipping through FLT results in transport cost of 40 AED/unit, while LTL mode shipment costs 48 AED/unit in transport cost. Assuming that there is no holding cost on in-transit inventory, answer the following questions: 1. Should the company shift to LTL shipments? 2. Currently, the firm is going through serious working capital problems and the finance department has marking that inventory will be charged at an inventory inform carrying cost of 30%. How will this affect the transportation mode decision? A company is examining two alternative choices for moving goods from its plant in Abu Dhabi to its depot in Fujairah. It has been traditionally shipping goods in full truck load (FLT) mode so as to save on transportation costs. Its finance department has been complaining about high inventories in Fujairah. A full truck load results in a shipment size of 160 units, where less than truckload (LTL) allow the firm to get lots of 40 units each. The average demand un Fujairah depot is 80 units per month. The cost of product is 500 AED per unit and the firm works with annual inventory carrying cost 20 %. Shipping through FLT results in transport cost of 40 AED/unit, while LTL mode shipment costs 48 AED/unit in transport cost. Assuming that there is no holding cost on in-transit inventory, answer the following questions: 1. Should the company shift to LTL shipments? 2. Currently, the firm is going through serious working capital problems and the finance department has marking that inventory will be charged at an inventory inform carrying cost of 30%. How will this affect the transportation mode decision?

Answer rating: 100% (QA)

1 The carrying cost per unit per annum will be 100 AED 500 AED20 In case of FLT 160 units will be or... View the full answer