Reference no: EM132558166

Question - The factory needs 1,000,000 light bulbs per day (assume 7 day a week operations), you have to average no more than $250k in fresh light bulbs in inventory on site. Your supplier is in China. Your firm "PTP" uses factory gate pricing. It is a 5 day trip from the factory to the port Shensen. The shipper only ships in groups of 5 containers of production per ship, 3 weeks on route to Seattle and 7 days by rail to your Muncie, IN factory. At a value of 50 cents a piece and holding costs of 5% per year.

Required -

1. What is the total value of the pipeline inventory?

2. What are the average annual holding costs of the pipeline inventory (average inventory in transit and average daily inventory waiting to be loaded into the plant times the annual holding cost rate)?

3. What do you need to do (number of containers on site) to achieve the $250k in average at the plant inventory value. Assume the containers hold 1,000,000 light bulbs a piece.