Question: O'Donnell & Joyce purchases components from three suppliers. Components purchased from Supplier A are priced at 7 each and used at the rate of 1
O'Donnell & Joyce purchases components from three suppliers. Components purchased from Supplier A are priced at each and used at the rate of units per month. Components purchased from Supplier B are priced at each and are used at the rate of units per month. Components purchased from Supplier C are priced at each and used at the rate of units per month. Currently, O'Donnell & Joyce purchases a separate truckload from each supplier. As part of its JIT drive, O'Donnell & Joyce has decided to aggregate purchases from the three suppliers. The trucking company charges a fixed cost of for the truck with an additional charge of for each stop. Thus, if O'Donnell & Joyce asks for a pickup from only one supplier, it charges ; from two suppliers, it charges ; and from three suppliers, it charges
What replenishment strategy would you suggest for O'Donnell & Joyce to minimize annual costs? Assume an annual holding cost of percent per year. Compare the cost of your strategy from each supplier. What is the cycle of inventory of each component at O'Donnell & Joyce?
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