Harley purchases from Supplier A are priced at $6 each and used at the rate of 20,000units per month. Components purchased from supplier B are priced at $5 each and are used at therate of 2,500 units per month. Components purchased from supplier C are priced at $6 each andused at the rate of 900 units per month. Currently, Harley purchases a separate truckload fromeach supplier. As part of its JIT drive, Harley has decided to aggregate purchases from the threesuppliers. The trucking company charges a fixed cost of $400 for the truck with an additionalcharge of $100 for each stop. Thus, if Harley asks for a pickup from only one supplier, thetrucking company charges $500; from two suppliers, it charges $600; and from three suppliers, itcharges $700. Harley incurs a holding cost of 25 percent per year.
a) If Harley aggregates purchases from all three suppliers, what is the cycle inventory of each component and what is the total annual cost excluding material cost?
b) If Harley orders separately from each supplier. What is the cycle inventory and total annual cost excluding material cost? How much is the difference in total costs compared to the aggregation case?