Reference no: EM133014919
Question - You are currently working for BestMotors, a US manufacturer. Your main responsibility is managing the shipping of motors from your supplier in China to your company's factory in Alabama.
Demand for the motors is normally distributed with an average of 130000 motors per year and an annual standard deviation of 11700. BestMotors currently purchases motors each year from the supplier at a price of $116 per unit.
The lead time for the delivery is 3 days on average, with a standard deviation of 1.5 days. You use Carrier RHY, which charges $6 per motor, with a minimum shipment of 2000 motors (i.e., Q=2000 motors.) Your company takes ownership of the shipment at the supplier's dock and will have to incur any holding costs from that point on. Your company's annual holding charge is 10%, a cycle service level of 95% and uses a 365 days per year for planning purposes. Your company includes the cost of transportation in the cost of the motors when calculating inventory costs.
Part 1 - What is the expected demand (in motors) over lead time?
What is the standard deviation of demand of motors over lead time?
Part 2 - What is the expected annual cycle stock holding cost?
What is the expected annual safety stock holding cost?
What is the expected annual pipeline inventory holding cost?
Part 3 - What is the expected annual transportation cost that Carrier RHY will charge?
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