Motor Company purchases components from three suppliers: Components from supplier Alpha cost $6 and are used at the rate 7,000 units/month; components from supplier Beta cost $4 and are used at the rate 5,000 units/month; components from supplier Gamma cost $5 and are used at the rate 3,000 units/month. The trucking company is charging a fixed cost of $550/truck (for the purpose of this exercise, assume that you do not need to worry about the truck capacity). Currently, they purchase separate truckloads from each supplier.
What is the corresponding minimal annual cost?
What is the cycle inventory of each component?
Assume that the annual holding cost is 15% of product cost, h=0.15.