Logistics Management $-$ Cycle Inventory Homework

Harley purchases components from three suppliers. Components purchased from Supplier A

are priced at $$5$ each and used at the rate of $20,000$ units per month. Components purchased

from Supplier B are priced at $$4$ each and are used at the rate of $2,500$ units per month.

Components purchased from Supplier C are priced at $$5$ each and used at the rate of $900$

units per month. Currently, Harley purchases a separate truckload from each supplier. As part

of its JIT drive, Harley has decided to aggregate purchases from the three suppliers. The

trucking company charges a fixed cost of $$400$ for the truck with an additional charge of

$$100$ for each stop. Thus, if Harley asks for a pickup from only one supplier, the trucking

company charges $$500$; from two suppliers, it charges $$600$; and from three suppliers, it

charges $$700.$ Assume a holding cost of $20$ percent of the component price per year. Compare

the following three ordering strategies. What is the lot size and total cost $($ordering plus

holding$)$ for each strategy.

a$).$ Harley's current strategy of ordering separately from each supplier. What is the lot size of

each component? What is the total cost?

b$).$ Harley aggregates purchases from the three suppliers in every order. What is the ordering

frequency? What is the order size of each component? What is the total cost?

c$).$ Harley aggregates purchases from the three suppliers, but not every order contains every

supplier; that is$,$ each order contains a selected subset of the suppliers. What is the ordering

frequency from each supplier? What is the order size of each component? What is the total

cost$?$