What is the annual cost of carrying inventory

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Reference no: EM131273109

Assume the lead-time is 5 weeks with sea freight and 1 week by air, and the review period is 1 week because of production cycles at the Vancouver plant. The product’s cost is $400 which includes the cost of sea freight. Airfreight adds an additional cost of $10 per unit and that the annual inventory holding cost rate is 12% of the unit cost. The total unit cost includes the product cost of $400 plus any freight charges. You will evaluate the various alternatives available to Brent Cartier to address the inventory and service problem? Specifically, consider the four alternatives below by examining the cost of inventory and any additional costs of shipping for all models in the Asian-Pacific region (ignore Europe and North America), using a 98% fill rate and the data given in HP Demand Data.xls. (Each model corresponds to a unique language-power-supply combination.) • Shipping five models by sea • Shipping five models by air • Manufacturing and shipping one generic model by sea • Manufacturing and shipping one generic model by air 1. Start by building the spreadsheet for shipping five separate models by sea. Ignore order costs and first calculate the L(z) and z values. Then you can find the three components of inventory, safety stock, cycle stock and pipeline stock. Find the total for each model and then sum them to get the total inventory. This is the average amount of inventory that is present at all times. What is the annual cost of carrying this inventory? (Note that the cost of the printer using sea freight includes the shipping cost, so there is no additional shipping cost.)

Reference no: EM131273109

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