Crunchy, a cereal manufacturer has dedicated a plant for one
Crunchy, a cereal manufacturer has dedicated a plant for one major retail chain. Sales at the retail chain average about 20,000 boxes a month and production at the plant keeps pace with this average demand. Each box of cereal costs Crunchy $3 and is sold to the retailer at a wholesale price of $5. Both Crunchy and the retailer use a holding cost of 20 percent. For each order placed, the retailer incurs an ordering cost of $200 per order placed. Crunchy incurs the cost of transportation and loading that totals $1,000 per order shipped.
- Given that it is trying to minimize its ordering and holding cost, what lot size will the retailer ask for in each order?
- is the annual ordering and holding cost for the retailer as a result of this policy?
- is the annual ordering and holding cost for Crunchy as a result of this policy?
- What is the total inventory cost across both parties as a result of this policy?
- What lot size minimizes the inventory costs (ordering, delivery, and holding) across this entire supply chain (both Crunchy and the retailer)?
- is the total inventory cost of this supply chain?
Compare the results obtained in a) and b) and discuss your observations.