Flanger is an industrial distributor that sources from hundreds of suppliers. One of these vendors supplies three products—A, B, and C—to Flanger. Annual demand for the three products are 24000, 600, and 600 units respectively. All the three products cost $200 per unit. Flanger uses a trucking company that charges a fixed transportation cost of $4000. An additional fixed cost of $1000 is incurred for receiving and storage. Flanger incurs a holding cost of 20% of the product purchase price.

a. Evaluate the lot sizes that Flanger should order if lots for each product are ordered and delivered independently. What is the annual total cost (holding and ordering) of such a policy?

b. Suppose the three product managers overseeing the replenishment of products A, B, and C decide to aggregate and order all three products each time they place an order. Evaluate the optimal order size for each product in this case. What is the annual total cost (holding and ordering) of this policy?

c. In part (b), if the trucks used by the trucking company have a capacity of 1800 units. What is the optimal order size for each product? What is the total annual cost (holding and ordering) of this policy?

Answer rating: 100% (QA)

a The annual demand for each product is Product A 24000 units Product B 600 units Product C 600 unit... View the full answer