If you have a third option for the data in Problem S11.14 and it costs only $4,000 and also takes 20 days, what is your most economical plan?
Problem
Your options for shipping $100,000 of machine parts from Baltimore to Kuala Lumpur, Malaysia, are (1) use a ship that will take 30 days at a cost of $3,800 or (2) truck the parts to Los Angeles and then ship at a total cost of $4,800. The second option will take only 20 days. You are paid via a letter of credit the day the parts arrive. Your holding cost is estimated at 30% of the value per year.
a) Which option is more economical?
b) What customer issues are not included in the data presented?