A plant in Indiana uses raw material at the rate of 10,000 pounds each day. This material comes from Ohio with an average cost of $1 per pound. Annual holding costs at the plant are 25 percent. Transportation choices available are as follows:
Train mode: Lead Time = 15 days, carload(100,000 pounds) at $400 per carload, full train (70 cars) at $15,000.
Truck mode: Lead time = 4 days, LTL at $0.07 per pound, small TL (40,000 pounds) for $2,000, large TL (60,000 pounds) for $2600.
Safety inventory of raw material is kept at twice the consumption during the lead time of supply.
Hint: shipping cost + cycle inventory holding cost + safety inventory holding cost + in transit inventory cost.
What mode of transport do you recommend?
Calculate total cost per day of using train carloads.
Calculate total cost per day of using full train.
Calculate total cost per day of using truck LTL at q=10,000.
Calculate total cost per day of using small truck TL.
Calculate total cost per day of using large truck TL.