SuperPart, an auto part distributor, has a large warehouse in Istanbul region and is deciding on a policy for the use of TL or TLT transportation for inbound shipping. TLT shipping costs $1 per unit. TL shipping costs $800 per truck plus $100 per pickup. Thus, a truck used to pickup from three suppliers costs 800 + 3 x 100 = $1100. A truck can carry up to 2000 units. SuperPart incurs a fixed cost of $100 for each order placed with a supplier. Thus, an order with three distinct suppliers incurs an ordering cost of $300. Each unit costs $50, and SuperPart uses a holding cost of a 20 percent. Assume that product from each supplier has annual demand of 3000 units.
a) What is the optimal order size and annual cost if LTL shipping used? What is the time between orders?
b) What is the optimal order size and annual cost per product if TL shipping is used with a separate truck for each supplier? What is the time between orders?
c) What is the shipping policy you recommend if each product has an annual demand of 3000? What is shipping policy you recommend for products with an annual demand of 1500?