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Economies from Joint ordering and replenishment: Example




Economies from Joint;ordering and;replenishment: Example;Harley purchases components from three suppliers.;Components purchased from Supplier A are priced at $5 each;and used at the rate of 20,000 units per month. Components;purchased from Supplier B are priced at $4 each and are used at;the rate of 2,500 units per month. Components purchased from;Supplier C are priced at $5 each and used at the rate of 900;units per month. Harley incurs a holding cost of 20 percent per;year. Currently, Harley purchases a separate truckload from;each supplier.;As part of its JIT drive, Harley has decided to aggregate;purchases and product pick ups from the three suppliers;who are located near each other. The trucking company that;Harley uses for component pick up charges a fixed cost of $400;for the truck with an additional charge of $100 for each stop.;Thus, if Harley asks for a pickup from only one supplier, the;trucking company charges $500, from two suppliers, it charges;$600, and from three suppliers, it charges $700. These truck;costs form the majority of Harleys ordering cost (other costs are;negligible).;Evaluate the annual cost of the joint replenishment strategy that;aggregates purchases and pickups from the three suppliers;(ignore truck capacities). Compare the cost of your strategy with;Harleys current strategy of ordering separately from each;supplier. What is the cycle inventory of each component at;Harley?


Paper#15180 | Written in 18-Jul-2015

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