Calculate the optimal order quantity and cycle inventory

Assignment Help Operation Management

Reference no: EM132213007

Honda purchases components from three suppliers. Components purchased from Supplier A are priced at $3 each and used at the rate of 16,500 units per month. Components purchased from Supplier B are priced at $5 each and used at the rate of 3,000 units per month. Components purchased from Supplier C are priced at $6 each and used at the rate of 1,000 units per month. The trucking company charges a fixed cost of $400 for the truck with an additional charge of $100 for each stop. Thus, if Honda asks for a pickup from only one supplier, the trucking company charges $400 + $100 = $500; from two suppliers, it charges $400 + 2*$100 = $600; from three suppliers, it charges $400 + 3*$100 = $700. Honda has a holding cost of 20%. Currently Honda purchases a separate truckload from each supplier.

a) Calculate the optimal order quantity, cycle inventory, and total annual cost (excluding material cost) of each component at Honda with the current strategy.

b) As part of its JIT drive, Honda has decided to aggregate purchases from the three suppliers. Calculate the optimal order quantity and cycle inventory of each component, and total annual cost (excluding material cost) for all three components at Honda with the complete aggregation strategy. (Please carry two decimal places for ??∗.)

c) Which strategy is better, current strategy or complete aggregation strategy?

Reference no: EM132213007

Questions Cloud

Planning process for a human services organization : What are the first three steps to take in order to begin the strategic planning process for a human services organization?

Prepared partnership prepared the contribution format : Prepared Partnership prepared the following contribution format income statement based on a sales volume of 1,000 units

What factors would you consider in making the decision : From the case in the chapter of Greenfield's Landscaping: What factors would you consider in making this decision? Using only the principle of utility.

Standards to protect competitors and consumers : Because Uber is so popular and the business model is being expanded to other industries, should there be regulation to develop compliance

Calculate the optimal order quantity and cycle inventory : Calculate the optimal order quantity, cycle inventory, and total annual cost (excluding material cost) of each component at Honda with the current strategy.

What is the cycle inventory of engines at harley : How many engines should Harley load onto each truck? What is the cycle inventory of engines at Harley?

What has her success revealed regarding stereotyping : Her accomplishments have illustrated the capacity of women to manage complex organizations in a manner that is equal to that of a man.

Discussions aimed at reaching an agreement : With reference to the process of engaging in discussions aimed at reaching an agreement,

How does reading the bamboo stalk make the reader : We discussed the term ‘humanity' in class and how to be a humane person. How does reading The Bamboo Stalk make the reader a more humane citizen?

User Account

All Pages