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Question
Table 14.1
Alison's Accessories is a high volume worldwide fashion house with outlets in 65 countries. Kalil, the supply chain manager is conducting her usual thorough analysis of her final four candidates for supplier and has developed the following tables of pertinent costs and other shipping metrics. Regardless of supplier, Alison's Accessories will operate 220 days per year and has forecast annual demand of 250,000 units. Kalil has obtained quotes for three different shipment sizes (Freight Costs table). All costs are in US Dollars.
Unit costs
| Supplier | Price/Unit | Carrying Cost |
| A | 123 | 22 |
| B | 125 | 19 |
| C | 126 | 18 |
| D | 100 | 40 |
Freight Costs
| Supplier | 15,000 units | 25,000 units | 50,000 units |
| A | 380,000 | 260,000 | 237,000 |
| B | 615,000 | 547,000 | 470,000 |
| C | 285,000 | 240,000 | 200,000 |
| D | 380,000 | 260,000 | 237,000 |
Other Costs
| Supplier | Lead Time | Admin Costs |
| A | 30 | 250,000 |
| B | 15 | 275,000 |
| C | 7 | 225,000 |
| D | 90 | 2,500,000 |
Use the date in Table 14.1. Analyze costs and make recommendations regarding the shipping options and suppliers. Which combination of shipping amount and supplier yields the lowest total cost?
Answer
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