Question: ZAMECH purchases sub - assemblies A and B from two suppliers located in Syracuse and New Orleans respectively for its assembly plants in Seattle and

ZAMECH purchases sub-assemblies A and B from two suppliers located in Syracuse and New Orleans respectively for its assembly plants in Seattle and San Jose, both of which operate 360 days a year. Assembly plant in Seattle makes 60 products per day, whereas the plant in San Jose 80 products per day. The product assembled in Seattle requires two units of sub-assembly A and one unit of sub-assembly B, whereas the product assembled in San Jose requires one unit of sub-assembly A and two units of sub-assembly B.Trucks have a capacity of 3,000 units of either sub-assembly and cost $4,000 per shipment. On-site and in-transit inventory holding cost per sub-assembly per day is $0.6. What are the annual total logistics (including transportation, in-transit inventory, and on- site inventory) cost, if the optimal shipment quantity for a milk-run delivery scheme is to be used? Under such a scheme, a truck would pick the sub-assemblies up first from Syracuse then from New Orleans and drop them off in San Jose first and in Seattle next. Assume that it takes exactly 3 days to drive from Syracuse to New Orleans, exactly 3 days from New Orleans to San Jose and exactly 3 days from San Jose to Seattle.

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