Economies from Joint ordering and replenishment: Example...

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Economies from Joint
ordering and
replenishment: Example
Harley purchases components from three suppliers.
Components purchased from Supplier A are priced at $5 each
and used at the rate of 20,000 units per month. Components
purchased from Supplier B are priced at $4 each and are used at
the rate of 2,500 units per month. Components purchased from
Supplier C are priced at $5 each and used at the rate of 900
units per month. Harley incurs a holding cost of 20 percent per
year. Currently, Harley purchases a separate truckload from
each supplier.
As part of its JIT drive, Harley has decided to aggregate
purchases and product pick ups from the three suppliers
who are located near each other. The trucking company that
Harley uses for component pick up charges a fixed cost of $400
for the truck with an additional charge of $100 for each stop.
Thus, if Harley asks for a pickup from only one supplier, the
trucking company charges $500, from two suppliers, it charges
$600, and from three suppliers, it charges $700. These truck
costs form the majority of Harleys ordering cost (other costs are
negligible).
Evaluate the annual cost of the joint replenishment strategy that
aggregates purchases and pickups from the three suppliers
(ignore truck capacities). Compare the cost of your strategy with
Harleys current strategy of ordering separately from each
supplier. What is the cycle inventory of each component at
Harley?

 

Solution ID:350893 | This paper was updated on 26-Nov-2015

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