10 Case Study - MoonChem

Questions
1. What is the current annual cost of MoonChem's strategy of sending full truck loads to each customer in the Peoria region t o replenish
consignment inventory?
2. Consider different delivery options and evaluate the cost of each. What delivery option do you recommend for MoonChem?

Inputs
Number of Small Customers
Number of Medium Customers
Number of Large Customers

12
6
2

Truck capacity**

40,000 pounds per load

Demand for Small Customer, R S =

12,000 pounds per year

Product specific ordering cost, S A =

$50.00

Demand for Medium Customer, R M =

60,000 pounds per year

Product specific ordering cost, S B =

$50.00

144,000 pounds per year

Product specific ordering cost, S C =

$50.00

Demand for Large Customer, R L =

Unit Cost, C A =

$1.00

Unit Cost, C B =
Unit Cost, C C =

$1.00

Common order cost, S =

Holding cost, h =

$1.00

$350.00
25%

Outputs
Supply each customer full truckloads
Type
Small
Medium
Large

# orders/year
0.30
1.50
3.60

Order Size**
40,000
40,000
40,000

Order Cost
$120
$600
$1,440

Holding Cost
$5,000
$5,000
$5,000

Total cost*
$61,440
$33,600
$12,880
$107,920

Order Size**
6,197
13,856
21,466

Order Cost
$775
$1,732
$2,683

Holding Cost
$775
$1,732
$2,683

Total cost*
$18,590
$20,785
$10,733
$50,108

Supply each customer independently

Type
Small
Medium
Large

# orders/year
1.94
4.33
6.71

Supply each customer type simultaneously

Type
# orders/year
Small
9.90
Small
9.90
Small
9.90
Small
9.90
Small
9.90
Small
9.90
Medium
9.90
Medium
9.90
Medium
9.90
Large
9.90
Lower than capacity constraint**

Order Size**
1,212
1,212
1,212
1,212
1,212
1,212
6,061
6,061
6,061
14,545
40,000

Order Cost
Holding Cost
$495
$152
$495
$152
$495
$152
$495
$152
$495
$152
$495
$152
$495
$758
$495
$758
$495
$758
$3,960
$1,818
Total cost per set of customers
Total Cost per Region

Total cost
$647
$647
$647
$647
$647
$647
$1,253
$1,253
$1,253
$5,778
$13,415
$26,830

Supply selected subsets in delivery

Type
Frequ. multiple
# orders/year
Small
0
4.95
Small
1
4.95
Small
1
4.95
Small
1
4.95
Small
1
4.95
Small
1
4.95
Medium
2
9.90
Medium
2
9.90
Medium
2
9.90
Large
2
9.90
Has to be equal or lower than capacity constraint**

Order Size**
2,424
2,424
2,424
2,424
2,424
2,424
6,061
6,061
6,061
14,545
40,000

Order Cost
$248
$248
$248
$248
$248
$248
$495
$495
$495
$3,960

Holding Cost
$303
$303
$303
$303
$303
$303
$758
$758
$758
$1,818

Total Cost per Region

Total cost
$551
$551
$551
$551
$551
$551
$1,253
$1,253
$1,253
$5,778
$12,839
$25,678

*) Total costs across all firms (sum of costs per customer type times number of firms per type)
**) Order size has to consider truck load constraint

CR - 4/13/2012 6:13 PM

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67088394.xls.ms_office - VALUES

Case Study - MoonChem

Questions
1. What is the current annual cost of MoonChem's strategy of sending full truck loads to each customer in the Peoria region t o replenish consignment inventory?
2. Consider different delivery options and evaluate the cost of each. What delivery option do you recommend for MoonChem?

Number of Small Customers

Number of Medium Customers
Number of Large Customers

12
6
2

Demand for Small Customer, R S =

=12*1000

Demand for Medium Customer, R M =

=12*5000

Demand for Large Customer, R L =

=12*12000

Unit Cost, C A =

Unit Cost, C B =
Unit Cost, C C =

Truck capacity**

40000

pounds per year

Product specific ordering cost, S A =

50

pounds per year

Product specific ordering cost, S B =

50

pounds per year

Product specific ordering cost, S C =

50

Common order cost, S =

Holding cost, h =

350

pounds per load

0.25

Supply each customer independently

Type
Small
Medium
Large

# orders/year
1.93649089566932
4.33012568865617
6.70820555467081

Order Size**

Order Cost
=C24*($G$18+G13)
=C25*($G$18+G14)
=C26*($G$18+G15)

Holding Cost
=(D24/2)*C17*$G$19
=(D25/2)*C18*$G$19
=(D26/2)*C19*$G$19

Total cost*
=(E24+F24)*$C$9
=(E25+F25)*$C$10
=(E26+F26)*$C$11
=SUM(G24:G26)

Order Size**
=$C$13/C32
=$C$13/C33
=$C$13/C34
=$C$13/C35
=$C$13/C36
=$C$13/C37
=$C$14/C33
=$C$14/C34
=$C$14/C35
=C15/C41
=SUM(D32:D41)

Order Cost
=C32*($G$13)
=C33*($G$13)
=C34*($G$13)
=C35*($G$13)
=C36*($G$13)
=C37*($G$13)
=C38*($G$14)
=C39*($G$14)
=C40*($G$14)
=C41*($G$15+G18)

Holding Cost
=(D32/2)*$C$17*$G$19
=(D33/2)*$C$17*$G$19
=(D34/2)*$C$17*$G$19
=(D35/2)*$C$17*$G$19
=(D36/2)*$C$17*$G$19
=(D37/2)*$C$17*$G$19
=(D38/2)*$C$18*$G$19
=(D39/2)*$C$18*$G$19
=(D40/2)*$C$18*$G$19
=(D41/2)*$C$19*$G$19
Total cost per set of customers

Total cost
=(E32+F32)
=(E33+F33)
=(E34+F34)
=(E35+F35)
=(E36+F36)
=(E37+F37)
=(E38+F38)
=(E39+F39)
=(E40+F40)
=(E41+F41)
=SUM(G32:G41)

=C13/C24
=C14/C25
=C15/C26

Supply each customer type simultaneously

Type
Small
Small
Small
Small
Small
Small
Medium
Medium
Medium
Large

# orders/year
9.89999999986023
=C32
=C33
=C34
=C35
=C36
=C37
=C38
=C39
=C40
Has to be equal or lower than capacity constraint**

Total Cost per Region =G42*3

Supply selected subsets in delivery
Type
Small
Small
Small
Small
Small
Small
Medium
Medium
Medium
Large

Frequ. multiple
1
1
1
1
1
2
=B55
=B55
2

# orders/year
5.84999999993366
=$C$49/B50
=$C$49/B51
=$C$49/B52
=$C$49/B53
=$C$49/B54
=$C$49*B55
=$C$49*B56
=$C$49*B57
=$C$49*B58
Has to be equal or lower than capacity constraint**

Order Size**
=$C$13/C49
=$C$13/C50
=$C$13/C51
=$C$13/C52
=$C$13/C53
=$C$13/C54
=$C$14/C55
=$C$14/C56
=$C$14/C57
=C15/C58
=SUM(D49:D58)

Order Cost
=C49*($G$13)
=C50*(+$G$13)
=C51*(+$G$13)
=C52*(+$G$13)
=C53*(+$G$13)
=C54*(+$G$13)
=C55*($G$14)
=C56*($G$14)
=C57*($G$14)
=C58*(G15+$G$18)

Holding Cost
=(D49/2)*$C$17*$G$19
=(D50/2)*$C$17*$G$19
=(D51/2)*$C$17*$G$19
=(D52/2)*$C$17*$G$19
=(D53/2)*$C$17*$G$19
=(D54/2)*$C$17*$G$19
=(D55/2)*$C$18*$G$19
=(D56/2)*$C$18*$G$19
=(D57/2)*$C$18*$G$19
=(D58/2)*C19*$G$19

Total cost
=(E49+F49)
=(E50+F50)
=(E51+F51)
=(E52+F52)
=(E53+F53)
=(E54+F54)
=(E55+F55)
=(E56+F56)
=(E57+F57)
=(E58+F58)
=SUM(G49:G58)

Total Cost per Region

=G59*3

*) Total costs across all firms (sum of costs per customer type times number of firms per type)
**) Order size has to consider truck load constraint

CR - 4/13/2012 6:13 PM

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67088394.xls.ms_office - FORMULAS