Assumptions

$$ Total costs include average inventory carrying costs, inventory order processing costs

and transportation costs;

$$ Average cycle stock equals $1/2$ of EOQ plus safety stock; and

$$ The number of order cycles equals annual demand in cases divided by the EOQ.

$1.$ What is the total annual logistics cost of inventory and transportation associated with the

current practice of shipping product by railroad freezer cars to Elizabeth, NJ and then by

commercial trucks to retail outlets? Safety stocks under this scenario are $550$ cases. Base your

calculations on expected $2024$ sales. Show your calculations. $(6$ points$)$

$2.$ What would the total annual logistics cost be if the company uses the private fleet option?

Safety stocks under this scenario are reduced to $279$ cases. Show your calculations. $(6$ points$)$

$3.$ What would the total annual logistics cost be if the company uses the option of shipping

product by air to the retail outlets? You will need to estimate safety stocks for this

scenario. To keep it simple, use the safety stock numbers for the above questions to

estimate your number based on lead time, since we do not have standard deviation figures

for sales. Show your calculations. $(6$ points$)$

$4.$ The above scenarios all use the EOQ model to calculate their costs. Would you

consider this the most appropriate inventory model to use, and if not, what alternative

would you suggest, and why? If you conclude that the EOQ model is the best, explain why

as well. $(6$ points$)$

$5.$ What other advice would you provide to The Indigo Ostrich executives that could

further improve their supply chain? This advice could include risk reduction, cost

reduction, service improvement or any other advice that could improve their operations

and supply chain. $(6$ points$)$