Case Study Senco

Senco Electronics Company

Senco Electronics Company

1) If you were Skip Grenoble, which alternative would you advise Ms. Shannon to implement? What criteria would you use to arrive at your decision?

Long-Run/Dynamic Analysis

Total cost =Fixed cost + Variable cost/unit ×Number of Unit.

Y=total cost

a=Fixed cost

b= Variable cost/unit

Y= a+bx

Y= a+bx

x= Number of Unit.

Ocean transportation

Yocean=a+ bx

b= (total cost-fixed costs)/Number of Unit

b= (520,000-410,000)/1,500,000

b=0.0733

Yocean=410,000+ 0.0733x

Air Transportation

Yair=a+ bx

b= (total cost-fixed costs)/Number of Unit

b= (586,000-350,000)/1,500,000

b=0.1573

Yair=350,000+ 0.1573x

Costs forecasting

We compared the cost benefit of utilization of air and sealift options. To do this, we examined the origin and destination of the product, associated variables; amount shipped over time and supply chain reliability. Given this criteria, we would recommend the Sealift option to Mrs. Shannon, because of the established supply chain with China that will provide continued reliability for the company and its customers.

For company transportations costs, the long term cost savings of the sealift option will be substantial. Largely, this is due to the expected 10 per cent annual growth over the next five years. For the air option, this growth will cause the variable costs of handling, carrying and ordering to spike and eventually surpass fixed costs in a short period. Also, the sealift option can absorb this annual increase and mitigate the costs far better. Ultimately, the best transportation choice is the one that delivers their high quality product in an amount of time the consumer deems acceptable at the lowest possible cost. For all these reasons, we believe the sealift option is the best option.

2) At what level of demand...