DO NOT USE EXCEL

1. A distributor sources products from three different suppliers. Currently, the distributor uses truck loading (TL) transportation to source separately from each supplier. Each truck costs $1,000 plus $400 per stop. Thus, delivering to each customer separately costs $1,400 per truck. The distributor is considering aggregating sourcing on a single truck. Demand for the fastest selling product is 120,000 units a year, demand for the medium selling product is 60,000 units per year, and demand for the slowest moving product is 12,000 units per year. Each product costs $10 and the distributor incurs an annual holding cost of 25 percent. Truck capacity is 12,000 units.

1. What is the annual transportation and holding cost if the distributor sources a full truckload (Q=12000) from each supplier in each order? How many days of inventory is carried for each product under this policy?
2. What is the optimal order quantity of each part if the distributor sources separately from each supplier? What is the annual transportation and holding cost? How many days of inventory is carried for each part under this policy?
3. What is the optimal order quantity for each product if the distributor aggregates shipments from each of the three suppliers on every truck that arrives? What is the annual transportation and holding cost? How many days of inventory are carried at each customer under this policy?
4. Can you come up with a tailored policy that has lower costs than the policies in (b) or (c)? What are the costs and inventories for your suggested policy?