SUBJECT : SUPPLY CHAIN AND OPERATIONS MANAGEMENT
Harley Davidson has its engine assembly plant in Milwaukee and its motorcycle assembly plant in Pennsylvania. Engines are transported between the two plants using trucks. Each truck trip costs $1,000. The motorcycle plant assembles and sells 300 motorcycles each day. Each engine costs $500 and Harley incurs a holding cost of 20 percent per year.
How many engines should Harley load onto each truck? What is the cycle inventory of engines at Harley?
Harley has decided to implement Just In Time (JIT) at the motorcycle assembly plant. As part of this initiative it has reduced the number of engines loaded on each truck to 100.
If each truck trip still costs $1,000, how does this decision impact annual costs at Harley?
What should the cost of each truck be if a load of 100 engines is to be optimal for Harley?