Merve

IE-355-HW1

Please submit electronically using LMS including excel files. There are a total of two questions in this homework.

Due: Friday, April 10th at 17:00

Q-1 )

A power plant in California uses coal at the rate of 100,000 pounds each day. It also uses MRO material at the rate of 1,000 pounds each day. The coal comes from Wyoming and the MRO material comes from Chicago. Coal costs $0.01 per pound, whereas MRO material costs $10 per pound, on average. Holding costs at the power plant are 25 percent. Transportation choices available are as follows:

Train Lead time = 15 days Carload (100,000 pounds) at $400 per carload Full train (70 cars) at $15,000 per train

Truck Lead time = 4 days Minimum cost = $100 Up to 10,000 pounds at $0.08 per pound Between 10,000 and 20,000 pounds at $0.07 per pound for entire load Between 25,000 and 40,000 pounds at $0.06 per pound for entire load Small TL (40,000 pounds) for $2,000 LargeTL (60,000 pounds) for $2,600

Safety inventory of coal and MRO materials is kept at twice the consumption during the lead time of supply. What mode of transport do you recommend for each of the two products? Why?

Q-2 ) The DAMCO Company produces a line of luggage goods. The typical distribution plan is to produce finished goods inventories to be kept at the plant site. Goods are then shipped to company-owned field warehouses by way of common carriers. Rail is currently used to ship between the East Coast plant and a West Coast warehouse. The average transit time for rail shipments is T = 21 days. Inventory holding cost is estimated at 30% per year at the East Coast Plant and in transit, and 25% per year at the West Coast Warehouse, based on a value of C = $30 per unit. The company wishes to select the mode of transportation that will minimize the total costs. It is estimated that for every day that transit time can be reduced from the current 21 days, average inventory levels can be reduced by 1 percent.

Picture 1 : Illustration of Company’s...