CASE STUDY Selecting Transportation Modes for China Imports Jackie Chen, vice president of China Imports, was look times cheaper than air freight. Ocean shipping, however, ing to design a framework to select transportation modes took longer and was less reliable. The average lead time for various products imported from China to the United using ocean shipping was nine weeks, with a standard States. His basic options were to either use air freight or deviation of three weeks. ocean shipping in 20-foot containers. Air freight was faster and more reliable, but ocean shipping was much Product Characteristics cheaper. He decided to evaluate the shipping decision Weekly demand for smartphones averaged 1.000 and for two very different product categories-consumer had a standard deviation of 400. Each smartphone cost clectronics, such as smartphones, and decorative hard- ware, such as door handles and hinges. $300 and weighed 0.1 kg. The typical life cycle for a customers from a warehouse near the port of Longuet availability. Weekly demand for decorative hardware China Imports provided a variety of products to its smartphone was about one year, it was critical to not lose of 25 percent on all inventory held and aimed to provide averaged 5,000, with a standard deviation of 1,000. Each a 98 percent cycle service level on its products. The high Decorative hardware tended to have a long life cycle unit of decorative hardware cost $20 and weighed 1 kg. level of service aligned with the high quality of products the company was still selling door handles and hinges that the company imported. that were introduced more than a decade earlier. Transportation Options from China Air freight and ocean shipping were the two options Study Questions available to move product from China to the United 1. What is the annual cost of using air freight to import States. Air freight charged $10 per kilogram shipped and smartphones? What is the annual cost of using occan ship- required a minimum shipment of 50 kg. Besides being ping to import smartphones? fast, air freight was also quite reliable. The average lead 2. What is the annual cost of using air freight to import deco rative hardware? What is the annual cost of using ocean time on air freight was one week, with a standard devia- shipping to import decorative hardware? tion of lead time of 0.2 weeks. Ocean shipping was much 3. What other factors should be considered in the choice of cheaper and cost $1,200 per 20-foot container. Given transportation mode? What mode would you recommend that each container could hold up to 15,000 kg, the ship for each product? Suggest a general framework that Jackie ping cost per kilo by ocean was more than a hundred can use across all product categories