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HW Problems Week 5

The document presents two supply chain problems related to shipping alternatives. In Problem 1, two-day freight is recommended over five-day freight due to higher holding costs associated with the longer shipping time. In Problem 2, six-day shipping is determined to be the most economical option when compared to overnight and two-day shipping, after calculating the savings from holding costs and shipping fees.

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33 views3 pages

HW Problems Week 5

The document presents two supply chain problems related to shipping alternatives. In Problem 1, two-day freight is recommended over five-day freight due to higher holding costs associated with the longer shipping time. In Problem 2, six-day shipping is determined to be the most economical option when compared to overnight and two-day shipping, after calculating the savings from holding costs and shipping fees.

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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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5.3.

2 Problems: Supply Chain

Complete the following problems to test your understanding:


Chapter 15 - Problem 1
Chapter 15 - Problem 2

Chapter 15 - Problem 1
A manager at Strateline Manufacturing must choose between two shipping alternatives: two-day
freight and five-day freight. Using five-day freight would cost $135 less that using two-day
freight. The primary consideration is holding costs, which is $10 per unit per year. Two thousand
items are to be shipped. Which alternative would you recommend? Explain.
Ans. The formula to calculate this is
H(d) / 365
H= Holding costs
d= Difference in days between the shipping alternatives
H= $10 x 2,000 = $20,000
The difference between the five-day freight and two-day freight is 3
= 2,000 × $10 × (3/365) = $20,000 × (3/365)
= $164.39
Holding cost for 3 day of extra freight is $164.39.
This cost of holding on to the freight is more than the $135 savings so the two-day freight will be
best alternative.

Chapter 15 - Problem 2
Determine which shipping alternative would be most economical to ship 80 boxes of parts when
each box has a price of $200 and holding costs are 30 percent of the price, given this shipping
information: overnight, $300, two-day, $260, six-day, $180.
Ans. Here we are using the overnight fee of $300 as the baseline to determine the savings on the
two-day and six-day alternative.

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Overnight
$200 x 80 = $16,000 (total price of the boxes being shipped)
Holding costs are 30 percent of the price.
$16,000 / .30= $4,800
Holding costs = $4,800
Two-day
Shipping fee = $260
$300 - $260 = $40 (difference in two-day and overnight)
Holding costs per day using the H(d) / 365 formula
$4,800 x 1/365 = $13.15
$40 - $13.15 = $26.85
The savings is $26.85 with two-day shipping.
Two-day
Shipping fee = $180
$300 - $180 = $120 (difference in six-day and overnight)
Holding costs per day using the H(d) / 365 formula
$4,800 x 5/365 = $65.75
$120 - $65.75 = $
The savings is $54.25 with six-day shipping.
The saving is greater with six-day shipping so this would be the best alternative.

This study source was downloaded by 100000898783088 from CourseHero.com on 05-13-2025 20:11:47 GMT -05:00

https://www.coursehero.com/file/158251279/HW-Problems-Week-5docx/
This study source was downloaded by 100000898783088 from CourseHero.com on 05-13-2025 20:11:47 GMT -05:00

https://www.coursehero.com/file/158251279/HW-Problems-Week-5docx/
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