Analyzing the shipping alternatives
Manufacturing Co. in Ohio. Handfield has daily shipments of a power-steering
pump from its Ohio plant to an auto assembly line in Alabama. The value of the
standard shipment is $250,000. Monczka-Trent has two options: (1) its standard
2-day shipment or (2) a subcontractor who will team drive overnight with an
effective delivery of one day. The extra driver costs $175. Handfield’s holding
cost is 35% annually for this kind of inventory.
a) Which option is more economical?
b) What production issues are not included in the data
presented?
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