Innovation Distribution Co. Supply Chain Risk Case

Innovation Distribution Company: A Total Cost Approach Understanding Supply Chain Risk Case The initial purchase cost per unit paid to Dong Hai Supply is calculated as follows. The current exchange rate is 1 CNY China Yuan Renminbi = 0.14646 U.S. Dollar. As pointed out, the price per unit in Dong Hai supply is 547 ¥. Therefore, the price per unit is 547 x 0.14646 = 80.11362. The initial purchase cost per unit in U.S. Dollars is $80.11 (Frankel, 2013).

The average time for an order filling a TEU container to come from Dong Hai Supply in Chengdu, China to the distribution center in Alliance Fort Worth Dong Hai Supply in Chengdu, China to the distribution center in Alliance Fort Worth Mean Variance Standard Deviation Time for processing and manufacturing order at Dong Hai Moving Container by Rail from Chengdu to Shanghai Loading to ship at Port of Shanghai Pacific Ocean to Port of Long Beach Clearing Customs and Unloading at Long Beach Long Beach to Alliance Fort Worth 4 Total lead time for Dong Hai 43 11.9025 3.45 Actual Days for order in Transit 28 Therefore, the average time is 43 days.

ii. The average time for an order filling a TEU container to come from CousinsAg in Wahoo, Nebraska to the distribution center in Alliance Fort Worth CousinsAg in Wahoo, Nebraska to the distribution center in Alliance Fort Worth Mean Variance Standard Deviation Time for processing and manufacturing order at CousinsAg 10 From supplier to Alliance Fort Worth 5 Total lead time for CousinsAg 15 1.2996 1.14 Actual days for order in Transit 5 Therefore, the average time is 15 days.

Question 3 The cost to ship a TEU container from Dong Hai Supply in Chengdu, China, to IDC's Alliance Fort Worth Distribution Center. IEC charges ¥ 12,414.5 for each TEU shipped. Import tariffs and duties are $325 per TEU and shipping cost from Long Beach to AFW is $2,250. Remember, 1 CNY China Yuan Renminbi = 0.14646 U.S. Dollar or use the $80.11 rate. Therefore, the IEC charge in dollars is 12,415.5 x 0.14646 = 1,818.23.

The total cost is calculated as follows: Transportation Cost from Dong Hai Supply to Alliance Fort Worth TEU Shipment Charge $1,818.23 Import tariffs and duties per TEU $325.00 Rail Shipping Cost Long Beach to AFW $2,250.00 Total Transportation Cost $4,393.23 Hence, the total transportation cost for shipping a TEU container from Dong Hai Supply to AFW distribution center is $4,393.23.

Question 4 Economic order quantity (EOQ) can be delineated as the inventory order quantity level that diminishes the total cost of inventory, with regard to the most significant costs, which are carrying costs and ordering costs (Coyle et al., 2016). i. Economic Order Quantity if we purchase everything from CousinsAg CousinsAg Annual Demand 21,500 Ordering Cost $105.00 Carrying Cost 32.20% EOQ Thus, the EOQ is 406 units ii. Economic Order Quantity if we purchase everything from Dong Hai Supply Dong Hai Supply Annual Demand 21,500 Ordering Cost $182.00 Carrying Cost 32.20% EOQ Thus, the EOQ is 551 units.

Question 5 As pointed out, the objective is to maintain an in-stock probability of 97.7% for customers. i. Units of safety stock will we need to hold if we purchase everything from Dong Hai Supply Dong Hai Supply Standard Deviation for Topping Up 3.45 Average days for topping up 43 Deviation of everyday sales 11 Average daily sales 58.90411 Units of Safety Stock Thus, the units of safety stock needed to be held if everything is purchased from dong Hai Supply is 431 units. ii.

Units of safety stock will we need to hold if we purchase everything from CousinsAg CousinsAg Standard Deviation for Topping Up 1.14 Average days for topping up 15 Deviation of everyday sales 11 Average daily sales 58.90411 Units of Safety Stock Thus, units of safety stock needed to be held if everything is purchased from CousinsAg is 159 units. Question 6 i.

The in-transit carrying cost per unit if we purchase everything from Dong Hai Supply Dong Hai Supply Actual Days in Transit 28 Cost of each Unit during transit 80.11362 Carrying Cost 32.20% In-Transit Carrying Cost for every unit 1.978916 ii.

The in-transit carrying cost per unit if we purchase everything from CousinsAg CousinsAg Actual Days in Transit 5 Cost of each Unit during transit 85 Carrying Cost 32.20% In-Transit Carrying Cost for every unit 0.374932 Question 7 The average inventory level takes into account half of the average cycle stock then added to the amount of safety stock already held. i.

Average inventory level (in units) we will hold at the IDC's Alliance Fort Worth Distribution Center if we purchase everything from Dong Hai Supply Dong Hai Supply Average cycle stock = (Economic order quantity/2) Units of safety stock Average inventory level Therefore, the average inventory level is 707 units. ii.

Average inventory level (in units) we will hold at the IDC's Alliance Fort Worth Distribution Center if we purchase everything from CousinsAg CousinsAg Average cycle stock = (Economic order quantity/2) Units of safety stock Average inventory level Therefore, the average inventory level is 362 units. Question 8 i.

The total annual inventory carrying cost (in dollars) for the safety stock and cycle stock inventory held at the Alliance Fort Worth Distribution Center if we purchase everything from Dong Hai Supply Dong Hai Supply Unit Price 80.11362 Transportation Cost (Total Transport Cost/EOQ) $7.98 In-Transit Cost 1.978916 Value for every Unit 90.06854 Average Inventory Held Carrying Cost 32.20% Total Annual Inventory Cost 20495.33 Therefore, the total annual inventory cost if everything is bought from Dong Hai Supply is $20,495.33 ii.

The total annual inventory carrying cost (in dollars) for the safety stock and cycle stock inventory held at the Alliance Fort Worth Distribution Center if we purchase everything from CousinsAg Transportation Cost from CousinsAg to Alliance Fort Worth TEU Shipment Charge $1,850.00 Import tariffs and duties per TEU $0.00 Rail Shipping Cost Long Beach to AFW $0.00 Total Transportation Cost $1,850.00 CousinsAg Unit Price 85 Transportation Cost (Total Transport Cost/EOQ) $4.55 In-Transit Cost 0.374932 Value for every Unit 89.92985 Average Inventory Held Carrying Cost 32.20% Total Annual Inventory Cost 10486.27 Therefore, the total annual inventory cost if everything is bought from CousinsAg is $10,486.27.

Question 9 i. On a per-unit basis (in dollars), what is the total inventory carrying cost for the safety stock and cycle stock inventory held at IDC's Alliance Fort Worth Distribution Center if we purchase everything from Dong Hai Supply The total annual units = 21,500 units. Therefore, the unit cost is obtained by dividing the total annual inventory carrying cost by the total annual units. Dong Hai Supply Total Annual Inventory Cost 20495.33 Total Annual Units 21,500 Unit Cost 0.953271 Therefore, the unit cost is $0.95 ii.

On a per-unit basis (in dollars), what is the total inventory carrying cost for the safety stock and cycle stock inventory held at IDC's Alliance Fort Worth Distribution Center if we purchase everything from CousinsAg? CousinsAg Total Annual Inventory Cost 10486.27 Total Annual Units 21,500 Unit Cost 0.487733 Therefore, the unit cost is $0.49 Question 10 The total cost of ownership encompasses all costs including the initial purchase price, the unit transportation cost, the safety stock cost, the cycle stock and the ordering cost. i.

The total cost of ownership per unit (in dollars) if we purchase everything from Dong Hai Supply Number of orders placed per year 39.03371 Cost to place.