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m Established in 1996 in China
m Manufacturer of specialty chemicals
m Export pharmacy products, raw material and industry
chemicals
m Eight manufacturing plants
m Forty distribution centers
m ëohn Kresge was vice president of supply
chain management.
m Use service of golden trucking
m Capacity is $40,000 per truck
m Truck charge fix cost for shipment
 615
Peoria
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ðmall 12 1,000

Medium 6 5,000

Large 8 12,000
hat is the current annual cost of
Moonchem·s strategy of sending full truck
loads to each customer in the Peoria region
to replenish consignment inventory?
Consider different delivery options and
evaluate the cost of each. hat delivery
option do you recommend for
Moonchem? How does your recommendation
impact consignment inventory at
Moonchem??
m There are three alternatives that we might
think upon which are:-
 ðupplying Each Customer Independently
 The ðupergroup
 ðeparate groups for the ðmall, Medium, and
Large customers
 Two groups with 6 ðmall, 3 Medium, and 1
Large customer each.
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m Total annual demand = 792,000 pounds
m Ordering cost = $350+(12+6+2)*50
$350+20*50 =$1,350
m The optimal order frequency =

m This
OOF Require higher capacity trucks (Not
Feasible)
m Now capacity of truck = 40,000
m no. of loads truck hold = 792,000/40,000
=19.8
m Each truck will hold pounds for the :-
1. ðmall customers(Q) =144,000/19.8
=7,273
2. Medium customers(Q) =360,000/19.8
=18,182
!

 customers(Q) = 288,000/19.8
=14,545

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m The total ordering cost for this policy =
No of Orders* Ordering cost=
(19.8 orders)($1350/order) = $26,730

m Total plan cost =

Total Holding Cost+ Total Ordering Cost=
$5,000+$26,730=
$31,730
m TO GROUPð ITH 6 ðMALL,3 MEDIUM AND ONE
LARGE CUðTOMER
m group has an annual demand = 396,000
m ordering cost (ð) = 350 + (10*50) = $850
m Holding cost = .25
m Demand for:-
m ðmall customers = 72,000
m Medium customers = 180,000
m Large customers = 144,000
m The optimal order frequency = n=¥™(D*H*C)/2ð
m =7.63
This ordering frequency exceeds truck capacity;
dividing group demand by
40,000 pounds per truck gives 9.9 orders
annually
The total plan cost is $26,830

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ðmall 7,273 $909 _


_
 

Medium 18,182 $2,273

Large 14,545 $1,818
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ù Alternative 1 Total cost per region= $50,108
ù Alternative 2 Total cost per region=$31,730
ù Alternative 3 Total cost per region= $26,830
ù Alternative 4 Total cost per region= $25,678
ù ðo Alternative 4th is the best from all of the
other
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