Reference no: EM132286396
Acme retail inc. wants to import shampoo from Brazil. The daily demand at Acme stores for shampoo is 1800 bottles per day with a standard deviation of 550. Acme is considering two suppliers to source from.
Option 1) Amazon Products Inc. will charge $5 per bottle, and the transportation from its factory to our distribution center (DC) in Texas will cost $0.8 per bottle. The supplier carries a large reserve of shampoo and only needs to fill up specially designed bottles for us on receiving an order. Filling up the bottles and getting them ready to be shipped takes 2 days. The transit from the factory to our DC takes 17 days.
Option 2) Rio Products Inc. will charge $4.5 per bottle, and the transportation from its factory to our DC in Texas will cost $1 per bottle. Rio Products also keeps a large quantity of shampoo ready and only needs to fill up bottles upon receiving the order. It takes Rio Products 3 days to fill up the bottles and get them ready to be shipped. The transit time from its factory to our DC is 21 days.
The cycle service level of shampoo is set at 95% (therefore z = 1.65 and Ez = 0.020637). An out of stock situation results in lost sales which incurs a loss of 5$. For both suppliers shipments will be in FEU containers, and each container can carry 30,000 shampoo bottles. Orders will be placed for 1 container at a time and the ordering cost is $100 for both suppliers. Acme’s inventory carrying cost is 0.20 $/$/year. Acme’s stores are open 6 days a week, 52 weeks a year.
1. What is the annual inventory carrying cost for Acme, if Amazon Products Inc. is selected as the supplier? (please enter your answer rounded to 2 decimal places)
2. What is the annual inventory carrying cost for Acme Inc, if Rio Products Inc is selected as the supplier? (please enter your answer rounded to 2 decimal places)
3. What is the annual ordering cost for Acme, if Rio Products is selected as the supplier? (please enter your answer rounded to 2 decimal places)