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Q. Problem 1:
A power plant in California uses coal at the rate of 80,000 pounds each day. It also uses MRO material at the rate of 800 pounds each day. The coal comes from Wyoming also the MRO material comes from Chicago. Coal prices $0.02 per pound, whereas MRO material prices $10 per pound, on average. Holding prices at the power plant are 25 percent. Transportation choices available are as follows:
Train:Lead time = 15 days Carload (100,000 pounds) at $400 per carload Full train (50 cars) at $15,000 per train
Truck:Lead time = 4 days Between 10,000 also 25,000 pounds at $0.07 per pound for entire load Between 25,000 also 40,000 pounds at $0.06 per pound for entire load Small TL (40,000 pounds) for $2,000
Safety inventory of coal also MRO materials is kept at twice the consumption during the lead time of supply. Illustrate what mode of transport do you recommend for each of the two products?
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