Question Three: $(15$ marks$)$

UrbanGardens Ltd$.$ operates a network of urban farms in California that require a continuous supply of organic compost for their sustainable agriculture operations. The compost is sourced from EcoCompost Solutions in Oregon and must remain aerated to retain its nutrient quality during transport. UrbanGardens consumes $15$ cubic meters of compost daily, with the compost priced at $$40$ per cubic meter $($EX works$).$

UrbanGardens has two transportation options, each with specific requirements based on volume capacity and the need to preserve compost quality during transit:

Insulated Flatbed Truck:

Container Volume Capacity: $45$ cubic meters

Lead Time: $2$ days

Cost per Trip: $$1,000$

Ventilated Freight Containers $($Rail$)$:

Container Volume Capacity: $90$ cubic meters

Lead Time: $5$ days

Cost per Container: $$1,500$

Additional Information:

UrbanGardens maintains a safety stock equal to two times the daily usage of compost during the lead time for each transportation mode.

The annual holding cost for compost is $20\%$ of its item cost.

Compost quality relies heavily on ventilation to prevent nutrient degradation.

Assume a $365-$day year.

a$)$ Based on the cost$-$sensitive approach to mode selection, which mode of transport would you recommend for UrbanGardens Ltd$.,$ and why?

b$)$ Take into account the following additional conditions and reassess your recommendation:

Insulated Flatbed Truck: To maintain a long$-$term partnership with EcoCompost Solutions, UrbanGardens must schedule a minimum of $10$ trips per month.

Ventilated Freight Containers $($Rail$)$: Rail shipments are only available on a weekly basis, with a maximum of one container per shipment.

Which mode of transport do you recommend under these conditions, and why?

$8$

ASAP ASAP ASA

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