Reference no: EM133526731

Question 1

Jessica Green, Head of Logistics at TranTran, is analyzing the inventory costs of product X0000. The demand for this product is normally distributed with a mean of 282 pallets per year and a standard deviation of 40 pallets per year.

The lead time for this product is 2 weeks. The cost of each pallet is $4,000, including transportation costs, and TranTran takes ownership of the product as soon as it leaves the supplier's facility. The ordering cost is $1,000 per order, independent of the number of pallets that TranTran orders.

TranTran's annual holding rate for product X0000 is 15%. Assume 52 weeks per year.

Considering that TranTran has set a CSL of 95% for product X0000, answer the following question:

What is the annual cost of safety stock (in US dollars) for product X0000?

Enter as dollars without $. Round your answer to the nearest integer.

Question 2

Currently, TranTran ships an Economic Order Quantity (EOQ) of item X0000, although the company has to order full pallets from its supplier (which means rounding the EOQ up to the next integer). Considering this:

What would be the annual cost of cycle stock (in US dollars)?

Enter as dollars without $. Round your answer to the nearest integer.

What would be the annual ordering cost (in US dollars)?

Enter as dollars without $. Round your answer to the nearest integer.

Question 3

Due to sustainability concerns at TranTran, the company is considering transitioning to a Full Truckload (FTL) policy for item X0000. The maximum capacity of one truck is 40 pallets. Under the new FTL policy:

What would be the new annual cost of cycle stock (in US dollars)?

Enter as dollars without $. Round your answer to the nearest integer.

What would be the new annual ordering cost (in US dollars)?

Enter as dollars without $. Round your answer to the nearest integer.

Question 4

Due to some quality issues, TranTran is considering a new transportation carrier for the replenishment of X0000. TranTran and this new carrier are now negotiating the contract for the next year.

Choose all correct statements.

Choose all correct statements.

Reducing the delivery lead time would not affect Safety Stock Costs.

Reducing the ordering costs (which are independent of the volume of pallets shipped) would increase the Economic Order Quantity.

Adding lead time variability to the shipment would decrease Cycle Stock Costs.

Adding lead time variability to the shipment would require TranTran to increase its safety stock.

Reducing the delivery lead time would reduce Pipeline Inventory Costs.