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    Bahar Roy
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    Eastern Electric purchases 120,000 motors per year from Westview motors for $120 per motor. Each motor weighs around 10 pounds and EE buys motors in lots of 3,000. Westview ships orders within a day. EE keeps a safety stock of 50% of average demand to account for the 5 day delivery time by rail or 3 days by truck. The plant manager received proposals from carriers and needs to decide which one to use based on shipping costs and quantity shipped.

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    Eastern Electric purchases 120,000 motors per year from Westview motors for $120 per motor. Each motor weighs around 10 pounds and EE buys motors in lots of 3,000. Westview ships orders within a day. EE keeps a safety stock of 50% of average demand to account for the 5 day delivery time by rail or 3 days by truck. The plant manager received proposals from carriers and needs to decide which one to use based on shipping costs and quantity shipped.

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    279 views2 pages

    Exercise Session 4

    Uploaded by

    Bahar Roy
    Eastern Electric purchases 120,000 motors per year from Westview motors for $120 per motor. Each motor weighs around 10 pounds and EE buys motors in lots of 3,000. Westview ships orders within a day. EE keeps a safety stock of 50% of average demand to account for the 5 day delivery time by rail or 3 days by truck. The plant manager received proposals from carriers and needs to decide which one to use based on shipping costs and quantity shipped.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pptx, pdf, or txt
    of 2

     Eastern Electric (EE) is a major appliance manufacturer with a large

    plant in the Chicago area. EE purchases 120,000 motors each year


    from Westview motors at a price of $120 per motor. Each motor
    averages about 10 pounds in weight, and EE has traditionally
    purchased lots of 3,000 motors. Westview ships each EE order
    within a day of receiving it. EE carries a safety inventory equal to 50
    percent of the average demand for motors during the delivery lead
    time. (holding cost=25% of motor cost)

     The plant manager in EE received several proposals (see the


    following table) for transportation and need to decide on the one to
    accept. Ship time by rail is 5 days (3 days for trucks)

     What should the plant manager do?


    Range of Quantity
    Carrier Shipping cost ($/cwt)
    Shipped (cwt)

    AM Railroad 200+ 6.50


    Northwest Trucking 100+ 7.50
    Golden Freightways 50-100 8.00
    Golden Freightways 150-250 6.00
    Golden Freightways 250+ 4.00

    *1 cwt =100 pounds

    1. Evaluate the total cost for all options

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