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The flat-screen computers are manufactured in China and major shipments are made
to Taiwan for its computer shops. Since demand for the computers is fairly stable,
shipments are delivered to Taiwan via sea transportation in fixed order quantity
throughout the year. Stephen Lam, a newly the logistics manager of View Song
Electric Ltd., decides to deliver the goods using sea or air carrier service in 2012. He
also wants to implement a Just-in-time system in the company to improve its
customer service level for its future business. Assuming that working days are 360,
the following data is given.
e) If the goods are delivered by air carrier and the order quantity is (3 marks)
revised to 1,000 units to meet the unit load device of air freight,
what is the new total annual inventory cost including the air freight
cost?
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= (1,140 * 180) / 2 + 400 * 292,410 / 1,140
= 102,600 + 102,600
= 205,200
Total annual inventory cost = carrying cost + ordering cost +
transportation cost by sea
TAC = $205,200 + $20 * 292,410
TAC = $205,200 + 5,848,200
= $6,053,400
Re-order point
= 292,410 / 360 * 10 days
= 8,122.5
= 8,123 unit
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