A consultant recommends thatthe same beer distributor replace the Central Austin warehouse with two smaller and identical
Question:
A consultant recommends thatthe same beer distributor replace the Central Austin warehouse with two smaller and identical warehouses - one in north Austin and the other in South Austin.The motivation is to be closer to customers. The current demand of 500 cases per week would be split evenly between the two smaller warehouses and each new warehouse would operate independently. Each new warehouse would face the same costs as the current warehouse: purchase cost of $8 per case of beer, fixed cost of $100 for each delivery from the supplier, and annual per-case inventory holding cost (cost of capital, insurance, etc.) at 25 percent of purchase cost. Furthermore, assume that both new warehouses would use the EOQ policy.
Suppose that the distributor follows the consultant's recommendation and ends up operating two warehouses.
(h) What would be the EOQ (in cases) for the North Austin warehouse? Choose the nearest integer.
(i) What would be the (average) number of deliveries to the South Austin warehouse by the supplier every year? Choose the nearest integer
(j) How much (in $) on average would the distributor have to pay per year for deliveries by the supplier? Choose the nearest hundred (= a multiple of 100).
(k) For the distributor, what would be the annual ordering plus holding costs ($)?Choose the
nearest integer.
Business Logistics Supply Chain Management
ISBN: 978-0130661845
5th edition
Authors: Ronald H. Ballou