EM4031 Week 6 Homework Panita A

Topics: Retailing, Sales, Shopping mall Pages: 1 (177 words) Published: November 28, 2014
QUESTION:
A retail chain has eight stores in a region supplied from four supply sources. Trucks have a capacity of 40,000 units and cost £1,000 per load plus, £100 per delivery. Thus. A truck making two deliveries charges £1200. The cost of holding one unit in inventory at retail for a year is £0.20. The vice president of supply chain is considering whether to use direct shipping from suppliers to retail stores or setting up milk runs from suppliers to retail stores. What network do you recommend if annual sales for each product at each retail store are 960.000 units? What network do you recommend if sales for each product at each retail store are 120.000 units? In your analysis assume that all trucks travel full.

ANSWER:
I recommend direct shipping for both cases. The calculation details are shown below;

1. Annual sale = 960.000 units/store

Direct Shipping
960,000 units*8 stores = 7,680,000 units
7,680,000 units/40,000 loaded units = 192 deliveries
192 deliveries*£1,100 = £211,200 = delivery cost

Milk Run
192 deliveries*£1,200 = 230,400/year = delivery cost

2. Annual sale = 120.000 unit/store

Direct Shipping
120,000 units*8 stores = 960,000 units
960,000 units/40,000 loaded units = 24 deliveries
24 deliveries*£1,100 = £26,400 = delivery cost

Milk Run
24 deliveries*£1,200 = £28,800/year = delivery cost
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