# Supply Chain

Submitted By agarwalrickie
Words 485
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A global company has decided to use India as its manufacturing base for the supply of printers to the European markets. The company offers three types of printers: high-end, standard and low-end. All three types of printers offered by the firm are similar in size and shape. The only differences are in the software and the chip used in the printers. The three models of the printers cost Rs.20,000 , 15,000 and 10,000 per unit, respectively. If the firm decides to use air as the mode of transport, it can fly the goods in smaller lots of 100 units, while shipping via sea requires a minimum shipment size of 400 units. The demand in Europe is stable at 100 units per week for each of the three types of printers. Transportation and customs clearance take one week if air is used as the mode of transport; the same will take four weeks if sea is used as the medium of transport. Freight by air will be Rs360 per unit while freight by sea will be Rs.90 per unit. The annual inventory-carrying cost for the firm is 20 per cent of the cost of the item. The firm wants to decide on the optimum mode of transport. The relevant calculations for high end products are shown below.
Product Mode of Transport Cycle stock (units) Pipeline inventory (units) Average inventory Inventory carrying cost (thousand rupees) 2,400 600 1,800 450 1,200 300 Transportation Total cost costs per (thousand annum rupees) (thousand rupees) 468 2,868 1,872 2,472 468 2,268 1,872 2,322 468 1,668 1,872 2,172

High end Standard Low end

Sea Air Sea Air Sea Air

200 50 200 50 200 50

400 100 400 100 400 100

600 150 600 150 600 150

For sea as the mode of transport 1. Cycle-stock = 0.5 x Lot size of shipment =0.5 x 400=200 units 2. Pipeline inventory = Lead time x Demand rate=4 x 100 = 400 units Total inventory = Cycle-stock + Pipeline inventory = 200 +400 = 600 units Annual inventory carrying cost = 600 x...

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