Logistics manager would encounter in strategic planning

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Reference no: EM132277328

1. With suitable product specific examples discuss how different types of cost trade-offs a logistics manager would encounter in strategic planning.

2. The traffic manager of XYZ electric has just received a rate reduction offer from a trucking company for the shipment of fractional horse power motors to the company’s field warehouse. The proposal is a rate of $3 per hundred weight (cwt) if a minimum of 40,000 pounds is moved in each shipment. Currently shipments of about 20,000 pounds or more are moved at a rate of $5 per cwt. If shipment size falls below 20,000 pounds, a rate of $ 9 per cwt applies. Should the company implement new rate

To help the traffic manager make a decision the following additional information has been gathered.

Operational descriptive Figures

Annual demand on warehouse 5,000 motors per year

Warehouse replenishment order size (current) 114 per order

Weight of each motor, crated 175 pounds

Standard cost of motors in warehouse $200 per motor

Stock replenishment order handling costs $15 per order

Inventory carrying costs as a percentage of average value of inventory on hand for a year 25 percent of the cost of motors

Handling cost at warehouse $0.30 per cwt

Warehouse space unlimited

Hint: Please try your best to compare two scenarios, one is the cost of current practice, the other is increased shipment size to meet the 40,000 lbs requirement. A major criterion could be to evaluate the trade-off between inventory and transportation costs. You may evaluate two or three options in each scenario to make a better sense of the trade-offs. Consider weights of 114 motors as equivalent of 20,000 pounds.

Reference no: EM132277328

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