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Problem
Alison's Accessories is a high volume worldwide fashion house with outlets in 65 countries. Sadly, space does not permit an exhaustive list but once the test is over, check out their website. 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
Annual Freight Costs
15,000 units
25,000 units
50,000 units
380,000
260,000
237,000
615,000
547,000
470,000
285,000
240,000
200,000
Other Costs
Lead Time
Annual Admin Costs
30
250,000
15
275,000
7
225,000
90
2,500,000
Use the date in Table 1. Analyze costs and make recommendations regarding the shipping options and suppliers. Which combination of shipping amount and supplier yields the lowest total cost?
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