International trade may offer lower unit prices but at a higher risk. Consider the total cost and
Question:
International trade may offer lower unit prices but at a higher risk. Consider the total cost and trade off lower production costs with higher priced transportation and more uncertain delivery schedules. Add in disruptive weather patterns, multi-language requirements, and fluctuating exchange rates; not to mention political turmoil, labor disputes, and unique tariffs and duties.
throughout the world there is one source for Schachtel Schmuggel Bannware:
- Dong Hai Supply, an international supplier located in Chengdu, China
Throughout this turnaround, we will ship utilizing Twenty-foot Equivalent Units (TEUs) from each location. Assume the following:
- Projected Annual Demand is 21,500 units
- There are 365 days in a year
- All product will be shipped to a distribution center in Alliance Fort Worth (AFW) where we will service our customer's needs
- Inventory carrying cost is 32.2%
- A TEU container can hold up to 600 units of our product.
- The Harris EOQ formula is Q* = SQRT((2*Annual Demand*Ordering Cost)/(Inventory Carrying Cost*Unit Price))
- Our goal is to maintain a 97.7% service level.
- We have a deviation in daily sales of 11 units.
- We cannot buy or hold fractional units of a product
- Purchase Cost of $80.11
- Order Cost of $182
- 15 days to process, manufacture and pack order to be ready for shipping
- $4393.23 Is the cost to ship
- Shipping Time is 28 days with a standard deviation of 3.45 days
Inventory Carrying Costs are based on the value of the product at the time it is held in inventory. When the product is sitting in the Alliance Fort Worth distribution center, its value is a combination of purchase price PLUS any transportation costs to get it from the supplier to the DC PLUS in-transit carrying costs. What is the TOTAL ANNUAL INVENTORY CARRYING COST (in dollars) for our product if we purchase everything from Dong Hai Supply?
