Question: The following table provides shipping rates for packages using UPS next day air or ground service options. The rates vary according to both the weight

The following table provides shipping rates for packages using UPS next day air or ground service options. The rates vary according to both the weight of the package and the distance of the shipment (larger numbered zones are farther away). Note that the zone number also indicates the number of days required to deliver a package using ground service. For example, it would take three days and cost $7.40 to send a 10-pound package to zone 3 using ground service.

Suppose you have a package weighing 15 pounds that needs to be shipped to zone 5. The value of the material is $10,000 and the annual inventory holding rate is 40 percent of the product value. Which transportation mode (air or ground) minimizes the total shipping and transit inventory cost?

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Total cost Intransit inventory holding cost Carrier cost Air 1365 10000 40 6825 7921 Ground 5365 100... View full answer

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