Mike McNeely, logistics manager for the Illumination Light Company, has considered replacing the firm's manual customer order management system with electronic ordering, an EDI application. He estimates the current system, including labor, costs $2.50/order for transmission and processing when annual order volume is under 25,000. Should the order volume equal or exceed 25,000 in any given year, Mr. McNeely will have to hire an additional customer service representative to assist order reception in the manual process. This would raise the variable cost to $3.00/order. He has also estimated the rate of errors in order placement and transfer to be 12/1000 orders.EDI would cost $100,000 upfront to implement and variable costs are determined to be $0.50/order regardless of volume. EDI could acquire and maintain order information with an error rate of 3/1000 orders. An EDI specialist would be required to maintain the system at all times as well. Her salary is $38,000 in the first year and increases 3 percent each year thereafter.Order errors cost $5.00 per occurrence on average to correct in the manual system. EDI errors cost $8.00 on average to correct since the specialist inspects the system for flaws on most occasions.a. If the firm expects order volume over the next 5 years to be 20,000, 22,000, 25,000, 30,000, and 36,000 annually, would EDI pay for itself within the first 5 years?b. What effects aside from cost might Mr. McNeely consider when implementing EDI?a.Manual: order cost error cost total cost1year: 20000x2.5+(12/1000)x20000x5=512002year: 22000x2.5+(12/1000)x22000x5=563203 year: 25000x3+(12/1000)x25000x5=765004 year: 30000x3+(12/1000)x30000x5=918005 year: 36000x3+(12/1000)x36000x5=110160b.EDI: device cost salary error cost order cost total cost 1year: 100000+38000 +20000x(3/1000)x8 +0.5x20000=1484802year: 38000x(1+3%)+22000x(3/1000)x8 +0.5x22000=506683 year: 38000x(1+3%)^2+25000x(3/1000)x8+0.5x25000=534144 year: 38000x(1+3%)^3+30000x(3/1000)x8+0.5x30000=57243.65 year: 38000x(1+3%)^4+36000x(3/1000)x8+0.5x36000=61633.31.Mr. Stan Busfield, distribution center manager for Hogan Kitchenwares, must determine when to resupply his stock of spatulas. The DC experiences a daily demand of 400 spatulas. The average length of the performance cycle for spatulas is 14 days. Mr. Busfield requires that 500 spatulas be retained as safety stock to deal with demand uncertainty.a. Use simple reorder point logic to determine the order quantity for spatulas.b. Based on your answer to part (a), find Mr. Busfield’s average inventory level of spatulas.a. Use the reorder point to find the order quantity:R = D x T + SS= 400 x 14 + 500 = 6,100 spatulas reorder point is 6100, Order quantity is more than or equal to 5600. b. The average inventor is one-half the order quantity + safety sock:If Order quantity is equal to 5600, thenAverage inventory = 5600/2+500 = 3,300 spatulas4. Mr. John Eastes oversees the distribution of Tastee Sancks products from the plant warehouse to its two distribution centers in the United States. The plant warehouse currently has 42,000 units of the company’s most popular product, Chocolate Chewies. Mr. Estes retains 7000 units of the product at the warehouse as a buffer. The Cincinnati DC has an inventory of 12500 units and daily requirements of 2500 units. The Phoenix DC has an inventory of 6000 units and daily requirements of 2000 units.a. Determin e the common days’ supply of Chocolate Chewies at each DC.b. Given the above information and your answer to part (a), use fair share allocation logic to determine the number of Chocolate Chewies to be allocated to each DC.a. Common days’ supply of choc olate chewies:DS = [(42,000 - 7,000) + 18,500]/4500=11.89 days (around) b. Fair Share Allocation Logic:Allocation = (Days’ Supply x Daily Requirements) - InventoryACincinnati = (11.89 x 2,500) - 12,500 = 17,225 unitsAPhoenix = (11.89 x 2,000) - 6,000 = 17,780 units Attention : Together, the allocations equal 35,005 units (17,225 + 17,780) which is 5 more than the plant warehouse’s allocation supply. The difference rests with the rounding of the days’ supply figure.2. Mr. Busfield recently completed a course in logistics management and now realizes that there are significant costs associated with ordering and maintaining inventory at his distribution center. Mr. Busfield has learned that the EOQ is the replenishment logic that minimizes these costs. In an effort to find the EOQ for measuring cups, Mr. Busfield has gathered relevant data. Mr. Busfield expects to sell 44,000 measuring cups this year. Hogan acquires the measuring cups for 75 cents each from Shatter Industries. Shatter charges $8 for processing each order. In addition, Mr. Busfield estimates his company's inventory carrying cost to be 12 percent annually.a. Find Mr. Busfield's EOQ for measuring cups. Assume that Mr. Busfield accepts ownership of products upon arrival at his DC.b. Now assume Mr. Busfield must arrange for inbound transportation of the measuring cups since Hogan accepts ownership of products at the supplier's shipping point. Quantities of fewer than 4000 measuring cups cost 5 cents per unit to ship. Quantities of 4000 and above cost 4 cents per unit to ship. Determine the difference in total costs associated with an EOQ of 4000 units and the EOQ level found in part (a) when transportation costs must be considered.c. Given the information above and the low cost EOQ alternative determined in part (b), use period-order-quantity logic to determine the number of orders Hogan would place each year for measuring cups and the time interval between orders.a. The economic order quantity (EOQ) is the square root of the product of the numerator (two times order cost and demand) divided by the product of the denominator (inventory carrying cost times unit cost): EOQ = 2,797 cups Annual total cost with order quantities of 2,797 cups ( calculated in part (a)): Inventory Carrying Costs = ( 2,797/2 ) x 0 .75 x 12% = $ 125.87to determine Order Costs, the number of whole orders/yr shall firstly be determined: (44,000/2797) = 15.73 -> roundup to 16 whole orders/yr.Oorder costs= 16 orders x $8 / order = $ 128.00Transportation Costs = 44,000 units x $0 .05 / unit = $ 2,200Total Cost ( EOQ = 2,797 units ) $ 2,453.87 /year Annual total cost with order quantities of 4,000 cups:Inventory Carrying Costs = (4,000/2) x 0.75x 0.12 = $ 180Order Costs : determine the number of whole orders/ yr.44,000 /4,000 = 11 whole orders/ yr11 orders x $8/order = $ 88Transportation Costs = 44,000 units x ($0.04/unit) = $1,760.00Total Cost ( EOQ' = 4,000 units) $ 2,028The order quantity of 4,000 units costs ( $2,453.87 – 2,028.00) $425.87 less annually than 2,797 order quantity found in part (a) when transportation costs are considered.Test 4:1. Super Performance Parts (SPP) produces braking devices exclusively for the Ace Motor company, an automotive manufacturer. SPP has been leasing warehouse space at a public facility 20 miles from the company's plant. SPP has been approached by a group of four other Ace suppliers with the idea of building a consolidated warehouse to gain transportation and materials handling economies. An investment of $200,000 would be required by each of the five companies to acquire the warehouse. Payment of the initial investment secures I0 years of participation in the agreement. Annual operating expenses are anticipated to be $48,000 for each party. SPP is currently charged $6000 per month for use of the public warehouse facilities.SPP's outbound transportation from the public warehouse often consists of LTL quantities. Its annual outbound transportation bill is currently $300,000. SPP expects consolidated warehousing to more fully utilize truckload quantities with transportation expenses shared among the supplier pool. SPP's annual outbound bill would be reduced by 25 percent in the consolidated plan. Differences in inbound transportation costs are assumed negligible in this case.a. Compare the storage and shipping costs associated with consolidated warehousing as opposed to SPP's current, direct shipping plan. Are any efficiencies apparent through consolidation?b. Aside from potentially reducing costs, how else might SPPbenetit by participating in the consolidated warehouse?c. What disadvantages might exist in a consolidated warehouse as opposed to a direct shipping situation?a. Direct Shipping Plan (annual costs)Storage costs: $6,000/month x 12 months = $ 72,000Shipping costs: = $ 300,000Annual total costs: $372,000Consolidated warehousing (annual costs)Storage costs: fixed $200,000/ 10 years = $ 20,000/yearOperations cost = $ 48,000Shipping costs: ($300,000) x (1 - 25%) = $ 225,000Annualtotalcosts: $293,000b. The consolidated warehouse can be operated for $79,000 less per year over the agreemen t’s tenyear life.This is a creative thinking question for the purpose of discussion. Key points may include but are not limited to: better customer service (in various forms) to Ace, synergy through coordination with partners, SPP may be able to utilize/share assets not financially feasible on their own. c. This too is a creative thinking question. Key points might be: added risk through ownership(part-ownership), potential difficulties with coordination across partners, incongruent objectives may lead to tribulations, and possible cash flow difficulties due to fixed investment expenditures2. Assume you are the logistics manager for a luggage company. All bags are produced at the manufacturing facility in Guangzhou. The bags, valued at ￥30 each, are stored in a warehouse near the factory prior to distribution to DC locations in Shanghai, and the DC experiences an annual demand of 700,000 bags. Now the products are transported by rail and the average inventory for each warehouse is 100,000 bags. You estimate the inventory carrying cost to be 30 percent annually and the average inventory can be reduced 1% if the delivery time reduced one day each compared with the current. There are four transportation options available asQuestion: Now you need to decide which mode shall be selected to achieve the lowest total cost?（详细求解过程没有哦）test 5：Ms. Sara Ritter is the distribution manager for the Fiesta Soft Drink Company. She is considering full automation of the plant's warehouse. At present, the warehouse utilizes a mechanized system of materials handling. The current system employs 20 laborers at an average wage rate of $13/hour. Laborers work an average of 2000 hours per year. The mechanization costs $1 8,000 annually to maintain. The equipment was purchased 2 years ago with uniform payments of $25,000 made annually. In year 9 the mechanical equipment will be replaced by new machinery with fixed annual costs of $35,000. In addition, it will cost Fiesta $12,000 per year to maintain the new equipment with the same 20 laborers.The automated equipment would cost $1.2 million upfront for implementation. Only eight laborers and an automation specialist would be required to maintain operations in the new system. The laborers would earn $16/hour over 2000 hours each year. The automation specialist would earn a salary of $56,000 per year, increasing 2 percent annually after the first year. Much of the old mechanized equipment could be sold immediately for a total of $125,000. Maintenance of the automated system is estimated at $60,000 each year with this cost growing by 3 percent annually after the first year. The automated system is expected to serve Fiesta for 15 years.a. Examine the cash flow under each system. What is the payback period for automation?b. What advantages aside from long-term cost savings might an automated warehouse have over more labor-intensive systemsb.This is a creative thinking question for the purpose of discussion. Key points may include but are not limited to: automated systems have the potential to operate faster and more accurately than mechanized systems. In addition, the automated system requires less building space and can perform warehouse operations with greater certainty and less product damage.a.First,let's look at each system’s accompanying cash flow (next ten or fifteen years): Mechanized Handling System:Automated Handling System:Now let's look at the cumulative ten-year costs of each system:Year Mechanized Automated0 $ 563,000 $ 1,075,0001 $ 1,126,000 $ 1,447,0002 $ 1,689,000 $ 1,821,9203 $ 2,252,000 $ 2,199,836*4 $ 2,815,000 $ 2,580,8275 $ 3,378,000 $ 2,964,9746 $ 3,941,000 $ 3,352,3597 $ 4,504,000 $ 3,743,0678 $ 5,071,000 $ 4,137,1869 $ 5,638,000 $ 4,534,80410 $ 6,201,000 $ 4,936,017*By comparing cumulative costs for each system, we could see the mechanized system surpasses the automated system’s operating expenses in the third year ($2,252,000vs. $2,199,836).Test 6：Chronotronics produces two models of clock radios, the X-100 and the X-250 deluxe. Both products are currently packaged in a single-wall corrugation. Through close observation, the firm has discovered that 0.5 percent of both X-100s and X-250s are damaged between packaging and customer delivery. Chronotronics can package either model, or both, in double-wall corrugated fiberboard, which would reduce produc damage by half. The current single-wall packaging costs $0.80 per unit. Double-wall packaging costs 20 percent more. The X-100 and X-250 have market values of $40 and $70, respectively. Damaged units are a total loss. Chronotronics sold 12000 X-100s and 7000 X-250s last year. Forecasts indicate consistent sales for the X-100 and a 5 percent increase in X-250 sales over the next year. Note: Round up for whole units lost.a. From a least-cost perspective, should Chronotronics utilize double-wall corrugation with the X-100 next year?b. From a least-cost perspective, should Chronotronics utilize double-wall corrugation with the X-250 next year?c. From what you lerned in the course, how might packaging improvements affect transportation costs?pare the additional cost of providing double-wall corrugation for the X-100 with its potential loss and damage savings:Additional cost = cost/unit x forecasted sales= ($0.80 x 0.2) x 12,000 = $1,920Potential loss/Savings:First find the number of whole units lost:Units lost = (0.5 x 0.005) x 12,000 = 30 unitsThen find potential savings:Potential Savings=30 x 40=$1,200From a low-cost (and product-segmented) perspective at the given forecasted sales volume, Chronotronics would not utilize double-wall corrugation with the X-100 next year. The additional cost of providing the extra protection exceeds the savings from loss and damage by ( $1,920 – 41,200=)$720.b. Compare the additional cost of providing double-wall corrugation for the X-250 with its potential loss and damage savings:Additional cost = cost/unit x forecasted sales= ($0.8 x0.2) x (7,000 x 1.05) = $1,176 Potential loss/Savings:First find the number of whole units lost:Units lost = (0.5 x0.005) x (7,000 x 1.05) = 18.375 units------Attention that units lost must be rounded up to 19.Then find potential savings:Savings = 19 x 70 = $1,330Now we could see that the higher market value of the X-250 makes it a good idea to use double-wall corrugation from a low-cost perspective as its expected savings exceed the costs by ($1,330 - $1,176=) $154. Of course, Chronotronics should consider the system and channel-wide impact of making potential package improvements. Utilizing double-wall protection with one product might create efficiencies, making it less expensive for the firm to apply similar packaging to other product lines. Customers would likely approve of greater product protection measures so long as their costs are not affected significantly.c.This is a creative thinking question for the purpose of discussion. Key points may include but are not limited to: By improving packaging, the shipper can lower the likelihood of damage and appeal for lower transportation rates. Note, however, that packaging alternatives can also affect the weight of a package, another dimension of transportation cost.。