MGT-240 13&14

13.2. A company manufactures component parts for machine tools in North America and ships them to
Southeast Asia for assembly and sale in the local market. The components are shipped by sea, transit
time averages 6 weeks, and the shipping costs $2700 per shipment. The company is considering moving
the parts by air at an ­estimated cost of $7500; the shipment taking 2 days to get there. If inventory
carrying cost for the shipment in transit costs $100 per day, should they ship by air?
Why should the fact that forecasts are more accurate for nearer periods of time be considered? What
activities are affected by the shorter lead time?
13.4. A company ships a particular product to a market located 1500 miles from the plant at a cost of
$4.50 per mile. Normally it ships 500 units at a time. What is the line haul cost per unit?
13.5. In problem 13.4, if the company can ship the units unassembled, it can ship 750 units in a truck.
What is the line haul cost per unit now?
13.8. A company ships LTL to customers in a market in the Midwest at an average cost of $40 per cwt. It
proposes establishing a distribution center in this market. TL shipment costs to the DC would be $20 per
cwt., the estimated inventory carrying costs are $5 per cwt., and the local cartage (LTL) cost is estimated
at $10 per cwt. If the annual shipped volume is 100,000 cwt., what will the annual savings be by
establishing the distribution center?
13.10. Suppose the company in problem 13.8 had another market area located between the parent plant
and the proposed distribution center. The LTL costs from the plant to that market are $35 per cwt. The
company estimates that LTL shipments from the distribution center will cost $6 per cwt. Should it supply
this market from the distribution center or central supply?
14.5. Given the following costs, which process should be used for an order of 400 pieces of a given part?
What will be the unit cost for the process selected?
14.7. A major mail order house collected data on the reasons for return shipments over a 3­month
period with the following results: wrong selection 62,000; wrong size 50,000; order canceled 15,000;
wrong address 3000; other 15,000. Construct a Pareto diagram.
14.12. A process can produce a final product at the rate of 2 products per minute. If an individual
product takes 30 minutes to pass through the process, what is the inventory of products in the process
at any time?
14.13. A university registration process can register a person every 4 minutes. If there are an average of
12 people in line for the registration, how long will each person have to wait in line?