Which supplier is more cost effective using total cost

Assignment Help Supply Chain Management

Reference no: EM133647276

Problem

Paragon Electric needs to select a supplier for its manufacturing plant. Tables below show the annual requirements and the proposals submitted by two suppliers:

Requirements (annual forecast) 60,000 units

Inventory carrying rate 20% per year
Transportation cost $0.02 per unit-mile
Order Processing Cost $100 per order

	Supplier 1	Supplier 2
Unit Price	$10	$12
Supplier Fixed Lot Size (units)	6000	5000
Distance (miles)	200	120
Supplier Quality Rating (defects)	0.8%	1.0%

Determine which supplier is more cost effective using total cost of ownership concept. (Hint: you need to calculate the total cost including total unit cost, transportation cost, inventory holding/carrying cost, ordering cost, and quality cost for each supplier.)

Reference no: EM133647276

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