Deck 14: Transportation in a Supply Chain

Question 1

The most important operational decision related to transportation in a supply chain is the routing and scheduling of deliveries.

Answer 1

True

Question 2

The dabbawalas of Mumbai make a milk run to begin their day.

Answer 2

True

Question 3

Transportation cost depends on the prices offered by different carriers and the extent to which the shipper uses inexpensive and slow,or expensive and fast,means of transportation.

Answer 3

True

Question 4

A milk run is a route in which a truck either delivers product from a single supplier to multiple retailers or goes from multiple suppliers to a single retailer.

Question 5

Quasi-market prices for transportation infrastructure result in higher prices at peak locations and times and lower prices otherwise.

Question 6

Ignoring inventory costs when making transportation decisions can result in choices that worsen the performance of a supply chain.

Question 7

Transportation is a significant component of the costs incurred by most supply chains.

Question 8

Temporal aggregation decreases a firm's responsiveness because of shipping delay but also decreases transportation costs because of economies of scale that result from larger shipments.

Question 9

Milk runs reduce inbound transportation costs by consolidating large shipments directly from the supplier to the consumer.

Question 10

A dabba uses the Mumbai railway system to carry about 40 lunches each day.

Question 11

Transportation plays a key role in every supply chain because products are usually produced and consumed in the same location.

Question 12

Firms can significantly reduce the safety inventory they require by physically aggregating inventories in one location,which will generally decrease transportation costs.

Question 13

A carrier's decisions are affected by the prices that the market will bear,but not the responsiveness it seeks to provide its target segment.

Question 14

The vehicle-related cost is incurred whether the vehicle is operating or not and is considered fixed for short-term operational decisions by the carrier.

Question 15

A firm can meet customer needs by using tailored transportation to provide the appropriate transportation choice based on customer and product characteristics,but at a higher cost.

Question 16

A distributor makes investment decisions regarding the transportation infrastructure and then makes operating decisions to try to maximize the return from these assets.

Question 17

The logistical advantage that the dabbawalas of Mumbai have over many other food delivery services is an absence of uncertainty and a temporal aggregation of orders.

Question 18

Rail is the dominant mode of freight transportation in the United States and accounts for over 75 percent of the nation's freight bill.

Question 19

A carrier uses transportation to minimize the total cost (transportation,inventory,information,and facility)while providing an appropriate level of responsiveness to the customer.

Question 20

The mode of transportation that results in the lowest transportation cost will also lower total costs for a supply chain.

Question 21

The movement of product from one location to another as it makes its way from the beginning of a supply chain to the customer's hands is referred to as

A)transportation.
B)retailing.
C)distribution.
D)manufacturing.

Question 22

________ carriers typically move commodities over large distances at lower costs per unit shipped.

A)Air
B)Truck
C)Rail
D)Package

Question 23

The combination of a high density of customers and long logistical distance is best served by contracting with a package carrier.

Question 24

________ carriers are the preferred mode of transport for online businesses such as Amazon.com and Dell,as well as for companies such as W.W.Grainger and McMaster-Carr that send small packages to customers.

A)Air
B)Package
C)Rail
D)Water

Question 25

Which mode of transportation is the dominant form of domestic freight transportation?

A)Air
B)Truck
C)Rail
D)Water

Question 26

Tailored transportation is the use of different transportation networks and modes based on customer and product characteristics.

Question 27

Which mode of transportation is the most expensive?

A)Air
B)Truck
C)Rail
D)Water

Question 28

Investment decisions regarding the transportation infrastructure (rails,locomotives,trucks,airplanes,etc. )are the primary concern of

A)the shipper.
B)the supplier.
C)the manufacturer.
D)the carrier.

Question 29

Which of the following is the fastest delivery method of transportation?

A)Rail
B)Truck
C)Air
D)Intermodal

Question 30

The ________ is the party that requires the movement of the product between two points in the supply chain.

A)carrier
B)producer
C)shipper
D)consumer

Question 31

Which mode of transportation is used primarily for petroleum and natural gas?

A)Air
B)Truck
C)Water
D)Pipeline

Question 32

Only safety inventory should be aggregated if low demand exists for low value items.

Question 33

Which of the following uses transportation to minimize the total cost (transportation,inventory,information,and facility)while providing an appropriate level of responsiveness to the customer?

A)The shipper
B)The supplier
C)The manufacturer
D)The carrier

Question 34

The key players in any transportation that takes place within a supply chain are

A)the shipper and the receiver.
B)the shipper and the supplier.
C)the shipper and the manufacturer.
D)the shipper and the carrier.

Question 35

Transportation plays a key role in every supply chain because

A)products are normally produced and consumed in the same location.
B)products are rarely produced and consumed in the same location.
C)the cost of transportation is inconsequential.
D)transportation is not a factor in determining profitability.

Question 36

________ carriers offer a very fast and fairly expensive mode of transportation for cargo.

A)Air
B)Truck
C)Rail
D)Water

Question 37

Which mode of transportation is the least expensive?

A)Air
B)Truck
C)Rail
D)Water

Question 38

The combination of a high density of customers and short logistical distance is best served by a private fleet making milk runs.

Question 39

The combination of a medium density of customers and medium logistical distance is best served by contracting with an LTL carrier.

Question 40

The ________ is the party that moves or transports the product.

A)carrier
B)producer
C)shipper
D)consumer

Question 41

The total amount paid to various carriers for transporting products to customers is

A)transportation cost.
B)inventory cost.
C)facility cost.
D)processing cost.

Question 42

Which transportation network design option has the elimination of intermediate warehouses and its simplicity of operation and coordination as its major advantage?

A)Direct shipping network
B)Direct shipping with milk runs
C)All shipments via central DC
D)Shipping via DC using milk runs

Question 43

When infrastructure is publicly owned,it is important to price usage to reflect

A)the cost of rebuild the infrastructure once it is fully depreciated.
B)the incremental profit from the use of the infrastructure.
C)the marginal impact on the cost to society.
D)the market clearing price.

Question 44

The most important operational decision related to transportation in a supply chain is

A)minimizing cost of transportation.
B)maximizing profitability of the supply chain.
C)reducing the level of cycle inventory.
D)the routing and scheduling of deliveries.

Question 45

In almost all countries,roads,seaports,airports,rail and canals have this in common.

A)They were built and/or managed by the government.
B)They are located near the water.
C)They are the source of most of the tax revenue for municipalities.
D)They are staffed by foreign nationals.

Question 46

At a train station where lines intersect,the Mumbai dabbawalas perform

A)a forward logistics function.
B)a reverse logistics function.
C)a milk run.
D)a cross-dock function.

Question 47

Suppose that a highway is governed by a use fee charged to motorists that is based on congestion,operation and maintenance.The total traffic t is used to determine the cost of 5t2.What is the average cost per motorist?

A)2.5
B)5
C)5t
D)2.5t

Question 48

The Mumbai dabbawalas have a transportation network that at the beginning of each day is best described as

A)a milk run.
B)direct shipping to a single destination.
C)a tailored network.
D)direct shipping from source to customer.

Question 49

Which of these statements about use fees for a highway is best?

A)A flat rate results in lower use by most individuals.
B)A flat rate results in higher use by most individuals.
C)A flat rate has no impact on use by most individuals.
D)A fee based on congestion results in higher use by most individuals.

Question 50

The Mumbai dabbawalas have a transportation network that takes advantage of

A)a low uncertainty of demand.
B)temporal aggregation of demand.
C)use of transportation resources when they are underutilized.
D)both low uncertainty and temporal aggregation of demand and also use of transportation resources while they are underutilized.

Question 51

Suppose that a highway is governed by a use fee charged to motorists that is based on congestion,operation and maintenance.The total traffic t is used to determine the cost of 5t2 + 7t.What is the marginal cost?

A)12
B)5t + 7
C)10
D)10t + 7

Question 52

Which transportation network design is pictured?

A)Direct shipping network
B)Direct shipping via decentralized DCs
C)All shipments via central DC
D)Milk runs to multiple buyer locations

Question 53

Which transportation network design option establishes an extra layer between suppliers and retailers to store inventory and to serve as a transfer location?

A)Direct shipping network
B)Direct shipping with milk runs
C)All shipments via central DC
D)Direct shipping

Question 54

The Mumbai dabbawalas deliver

A)bottled water.
B)home-cooked lunches.
C)prayer beads.
D)letters and legal documents.

Question 55

Which transportation network design option uses a combination of milk runs,shipping via DC,shipping via intermediate DC with storage,and direct shipping with milk runs to reduce the cost and improve responsiveness of the supply chain?

A)Direct shipping network
B)Direct shipping with milk runs
C)Shipping via DC using milk runs
D)Tailored network

Question 56

Cheaper modes of transport typically have

A)shorter lead times and smaller minimum shipment quantities.
B)shorter lead times and larger minimum shipment quantities.
C)longer lead times and smaller minimum shipment quantities.
D)longer lead times and larger minimum shipment quantities.

Question 57

Which transportation network design is pictured?

A)Direct shipping network
B)All shipments via intermediate transit point.
C)Milk runs from a central DC
D)Distributed milk runs by multiple suppliers

Question 58

Suppose that a highway is governed by a use fee charged to motorists that is based on congestion,operation and maintenance.The total traffic t is used to determine the cost of 5t2 + 7t.What is the average cost per motorist?

A)12
B)5t + 7
C)10
D)10t + 7

Question 59

The Mumbai dabbawalas perform

A)a forward logistics function.
B)a reverse logistics function.
C)both a forward and a reverse logistics function.
D)neither a forward nor a reverse logistics function.

Question 60

Suppose that a highway is governed by a use fee charged to motorists that is based on congestion,operation and maintenance.The total traffic t is used to determine the cost of 5t2.What is the marginal cost?

A)5
B)5t
C)10
D)10t

Question 61

Serving a low density of customers at a long distance is best done using

A)an LTL carrier.
B)a cross dock distribution center with milk runs.
C)a package carrier.
D)a private fleet with milk runs.

Question 62

Scenario 14.1 - Vidalia Onions
When Vidalia onions are ready,the entire 13 county (plus parts of seven other counties)area in Georgia where they are grown is devoted to the harvest,packaging and shipping of this delicacy.The Onion Shack currently purchases 120,000 bags of onions each year at a price of $100 per bag (a bag is ten pounds).Onion Shack has historically purchased in lots of 3000 bags.Transit time and capacity vary as indicated in the table.The safety inventory that Onion Shack requires is 30% of lead time demand and the holding cost for a bag is 15% of cost.

Use Scenario 14.1 to determine the least expensive transportation option if the Onion Shack continues to purchase 120,000 bags of Vidalia onions each year.

A)Mashburn Rail
B)Sylvia Express
C)Anita Enterprises
D)Smith Trucking

Question 63

Scenario 14.2
SoxyBack,a manufacturer of fancy men's socks worn by fashionable gentlemen everywhere,is located in Oshkosh,Wisconsin.The socks are sold directly to fashion-conscious men all over North America.SoxyBack currently divides the United States into ten territories,each with its own sales force.All product inventories are maintained locally in each territory and replenished from Oshkosh every five weeks using UPS.The average replenishment lead time using UPS is one week.UPS charges at a rate of $0.75 + 0.33x where x is the quantity shipped in pounds.The products sold fall into two categories-Dandy and Popinjay.Dandy products weigh 0.2 pounds and cost $350 each.Popinjay products weigh 0.10 pounds and cost $35 each.
Weekly demand for Dandy products in each territory is normally distributed,with a mean of mH = 3 and a standard deviation of sH = 6.Weekly demand for Popinjay products in each territory is normally distributed,with a mean of mL = 25 and a standard deviation of sL = 6.
SoxyBack maintains sufficient safety inventories in each territory to provide a CSL of 0.975 for each product.Annual holding cost at SoxyBack is 30 percent.In addition to the current approach,the management team at SoxyBack is considering two other options:
Option A: Keep the current structure but replenish inventory once a week rather than once every five weeks.
Option B: Eliminate inventories in the territories,aggregate all inventories in a finished goods warehouse at Oshkosh,and replenish the warehouse once a week.
If inventories are aggregated at Oshkosh,orders will be shipped using FedEx,which charges $7.25 + 0.77x per shipment,where x is the quantity shipped in pounds.The factory requires a one-week lead time to replenish finished-goods inventories at the Oshkosh warehouse.An average customer order is for 1 unit of Dandy and 10 units of Popinjay.
Use Scenario 14.2 to determine the total annual cost of Option A for SoxyBack's distribution system.

A)$90,459
B)$75,994
C)$47,335
D)$42,598

Question 64

Serving a high density of customers at a long distance is best done using

A)an LTL carrier.
B)a cross dock distribution center with milk runs.
C)a package carrier.
D)a private fleet with milk runs.

Question 65

The cost of holding inventory incurred by the shipper's supply chain network is

A)transportation cost.
B)inventory cost.
C)facility cost.
D)processing cost.

Question 66

Scenario 14.2
SoxyBack,a manufacturer of fancy men's socks worn by fashionable gentlemen everywhere,is located in Oshkosh,Wisconsin.The socks are sold directly to fashion-conscious men all over North America.SoxyBack currently divides the United States into ten territories,each with its own sales force.All product inventories are maintained locally in each territory and replenished from Oshkosh every five weeks using UPS.The average replenishment lead time using UPS is one week.UPS charges at a rate of $0.75 + 0.33x where x is the quantity shipped in pounds.The products sold fall into two categories-Dandy and Popinjay.Dandy products weigh 0.2 pounds and cost $350 each.Popinjay products weigh 0.10 pounds and cost $35 each.
Weekly demand for Dandy products in each territory is normally distributed,with a mean of mH = 3 and a standard deviation of sH = 6.Weekly demand for Popinjay products in each territory is normally distributed,with a mean of mL = 25 and a standard deviation of sL = 6.
SoxyBack maintains sufficient safety inventories in each territory to provide a CSL of 0.975 for each product.Annual holding cost at SoxyBack is 30 percent.In addition to the current approach,the management team at SoxyBack is considering two other options:
Option A: Keep the current structure but replenish inventory once a week rather than once every five weeks.
Option B: Eliminate inventories in the territories,aggregate all inventories in a finished goods warehouse at Oshkosh,and replenish the warehouse once a week.
If inventories are aggregated at Oshkosh,orders will be shipped using FedEx,which charges $7.25 + 0.77x per shipment,where x is the quantity shipped in pounds.The factory requires a one-week lead time to replenish finished-goods inventories at the Oshkosh warehouse.An average customer order is for 1 unit of Dandy and 10 units of Popinjay.
Use Scenario 14.2 to determine the percentage increase in total annual cost of SoxyBack's current system if the cost of transportation triples while all other parameters are held constant.

A)0.9%
B)9%
C)90%
D)200%

Question 67

Scenario 14.2
SoxyBack,a manufacturer of fancy men's socks worn by fashionable gentlemen everywhere,is located in Oshkosh,Wisconsin.The socks are sold directly to fashion-conscious men all over North America.SoxyBack currently divides the United States into ten territories,each with its own sales force.All product inventories are maintained locally in each territory and replenished from Oshkosh every five weeks using UPS.The average replenishment lead time using UPS is one week.UPS charges at a rate of $0.75 + 0.33x where x is the quantity shipped in pounds.The products sold fall into two categories-Dandy and Popinjay.Dandy products weigh 0.2 pounds and cost $350 each.Popinjay products weigh 0.10 pounds and cost $35 each.
Weekly demand for Dandy products in each territory is normally distributed,with a mean of mH = 3 and a standard deviation of sH = 6.Weekly demand for Popinjay products in each territory is normally distributed,with a mean of mL = 25 and a standard deviation of sL = 6.
SoxyBack maintains sufficient safety inventories in each territory to provide a CSL of 0.975 for each product.Annual holding cost at SoxyBack is 30 percent.In addition to the current approach,the management team at SoxyBack is considering two other options:
Option A: Keep the current structure but replenish inventory once a week rather than once every five weeks.
Option B: Eliminate inventories in the territories,aggregate all inventories in a finished goods warehouse at Oshkosh,and replenish the warehouse once a week.
If inventories are aggregated at Oshkosh,orders will be shipped using FedEx,which charges $7.25 + 0.77x per shipment,where x is the quantity shipped in pounds.The factory requires a one-week lead time to replenish finished-goods inventories at the Oshkosh warehouse.An average customer order is for 1 unit of Dandy and 10 units of Popinjay.
Use Scenario 14.2 to determine the total annual cost of Option B for SoxyBack's distribution system.

A)$90,459
B)$75,994
C)$47,335
D)$42,598

Question 68

The cost of various facilities in the shipper's supply chain network is

A)transportation cost.
B)inventory cost.
C)facility cost.
D)processing cost.

Question 69

Scenario 14.1 - Vidalia Onions
When Vidalia onions are ready,the entire 13 county (plus parts of seven other counties)area in Georgia where they are grown is devoted to the harvest,packaging and shipping of this delicacy.The Onion Shack currently purchases 120,000 bags of onions each year at a price of $100 per bag (a bag is ten pounds).Onion Shack has historically purchased in lots of 3000 bags.Transit time and capacity vary as indicated in the table.The safety inventory that Onion Shack requires is 30% of lead time demand and the holding cost for a bag is 15% of cost.

Use Scenario 14.1 to determine the least expensive transportation option if the Onion Shack purchases 240,000 bags of Vidalia onions each year.

A)Mashburn Rail
B)Sylvia Express
C)Anita Enterprises
D)Smith Trucking

Question 70

The cost of loading/unloading orders,as well as other processing costs associated with transportation,is considered

A)transportation cost.
B)inventory cost.
C)facility cost.
D)processing cost.

Question 71

During a heated meeting at SoxyBack Headquarters,Al suggests that the reorder interval be changed from 5 weeks to 2.5 weeks,Bob suggests the ten locations be consolidated to five locations,Charles demands that the customer service level be set at 0.925 instead of 0.975,and David declares their holding cost should be 25% rather than 30%.If these four statements are made regarding the current system as described in Scenario 14.2,which option has the lowest annual inventory cost?

A)Al
B)Bob
C)Charles
D)David

Question 72

Scenario 14.2
SoxyBack,a manufacturer of fancy men's socks worn by fashionable gentlemen everywhere,is located in Oshkosh,Wisconsin.The socks are sold directly to fashion-conscious men all over North America.SoxyBack currently divides the United States into ten territories,each with its own sales force.All product inventories are maintained locally in each territory and replenished from Oshkosh every five weeks using UPS.The average replenishment lead time using UPS is one week.UPS charges at a rate of $0.75 + 0.33x where x is the quantity shipped in pounds.The products sold fall into two categories-Dandy and Popinjay.Dandy products weigh 0.2 pounds and cost $350 each.Popinjay products weigh 0.10 pounds and cost $35 each.
Weekly demand for Dandy products in each territory is normally distributed,with a mean of mH = 3 and a standard deviation of sH = 6.Weekly demand for Popinjay products in each territory is normally distributed,with a mean of mL = 25 and a standard deviation of sL = 6.
SoxyBack maintains sufficient safety inventories in each territory to provide a CSL of 0.975 for each product.Annual holding cost at SoxyBack is 30 percent.In addition to the current approach,the management team at SoxyBack is considering two other options:
Option A: Keep the current structure but replenish inventory once a week rather than once every five weeks.
Option B: Eliminate inventories in the territories,aggregate all inventories in a finished goods warehouse at Oshkosh,and replenish the warehouse once a week.
If inventories are aggregated at Oshkosh,orders will be shipped using FedEx,which charges $7.25 + 0.77x per shipment,where x is the quantity shipped in pounds.The factory requires a one-week lead time to replenish finished-goods inventories at the Oshkosh warehouse.An average customer order is for 1 unit of Dandy and 10 units of Popinjay.
In Scenario 14.2,which option has the lowest annual inventory cost?

A)Current system
B)Option A
C)Option B
D)Option A and Option B have identical annual inventory costs.

Question 73

Scenario 14.1 - Vidalia Onions
When Vidalia onions are ready,the entire 13 county (plus parts of seven other counties)area in Georgia where they are grown is devoted to the harvest,packaging and shipping of this delicacy.The Onion Shack currently purchases 120,000 bags of onions each year at a price of $100 per bag (a bag is ten pounds).Onion Shack has historically purchased in lots of 3000 bags.Transit time and capacity vary as indicated in the table.The safety inventory that Onion Shack requires is 30% of lead time demand and the holding cost for a bag is 15% of cost.

Use Scenario 14.1 to determine the in-transit inventory cost of the Mashburn Rail option if the Onion Shack purchases 240,000 bags of Vidalia onions each year.

A)$3287.67
B)$2604.67
C)$1972.60
D)$1864.60

Question 74

Scenario 14.2
SoxyBack,a manufacturer of fancy men's socks worn by fashionable gentlemen everywhere,is located in Oshkosh,Wisconsin.The socks are sold directly to fashion-conscious men all over North America.SoxyBack currently divides the United States into ten territories,each with its own sales force.All product inventories are maintained locally in each territory and replenished from Oshkosh every five weeks using UPS.The average replenishment lead time using UPS is one week.UPS charges at a rate of $0.75 + 0.33x where x is the quantity shipped in pounds.The products sold fall into two categories-Dandy and Popinjay.Dandy products weigh 0.2 pounds and cost $350 each.Popinjay products weigh 0.10 pounds and cost $35 each.
Weekly demand for Dandy products in each territory is normally distributed,with a mean of mH = 3 and a standard deviation of sH = 6.Weekly demand for Popinjay products in each territory is normally distributed,with a mean of mL = 25 and a standard deviation of sL = 6.
SoxyBack maintains sufficient safety inventories in each territory to provide a CSL of 0.975 for each product.Annual holding cost at SoxyBack is 30 percent.In addition to the current approach,the management team at SoxyBack is considering two other options:
Option A: Keep the current structure but replenish inventory once a week rather than once every five weeks.
Option B: Eliminate inventories in the territories,aggregate all inventories in a finished goods warehouse at Oshkosh,and replenish the warehouse once a week.
If inventories are aggregated at Oshkosh,orders will be shipped using FedEx,which charges $7.25 + 0.77x per shipment,where x is the quantity shipped in pounds.The factory requires a one-week lead time to replenish finished-goods inventories at the Oshkosh warehouse.An average customer order is for 1 unit of Dandy and 10 units of Popinjay.
Use Scenario 14.2 to determine the total annual cost of SoxyBack's current system if a series of promotions increases the standard deviation of demand for both the Dandy and Popinjay lines to 10.Assume that the mean weekly demand for both product lines remains the same.

A)$116,672
B)$140,869
C)$128,771
D)$152,967

Question 75

Temporal aggregation

A)is the process of combining orders across multiple locations.
B)increases a firm's responsiveness.
C)decreases transportation costs because of economies of scale.
D)is purely a theoretical concept;no practical business examples of this exist.

Question 76

During a heated meeting at SoxyBack Headquarters,Al suggests that the reorder interval be changed from 5 weeks to 2.5 weeks,Bob suggests the ten locations be consolidated to five locations,Charles demands that the customer service level be set at 0.925 instead of 0.975,and David declares their holding cost should be 25% rather than 30%.Their boss,Indecisive Ivan decides to make all of these changes to the current system as described in Scenario 14.2.How much money will be saved in annual inventory costs from the current system?

A)$45,082
B)$52,404
C)$61,970
D)$64,043

Question 77

Scenario 14.1 - Vidalia Onions
When Vidalia onions are ready,the entire 13 county (plus parts of seven other counties)area in Georgia where they are grown is devoted to the harvest,packaging and shipping of this delicacy.The Onion Shack currently purchases 120,000 bags of onions each year at a price of $100 per bag (a bag is ten pounds).Onion Shack has historically purchased in lots of 3000 bags.Transit time and capacity vary as indicated in the table.The safety inventory that Onion Shack requires is 30% of lead time demand and the holding cost for a bag is 15% of cost.

Use Scenario 14.1 to determine the transportation cost of the Anita Enterprises option if the Onion Shack purchases 240,000 bags of Vidalia onions each year.

A)$156,000
B)$144,000
C)$162,000
D)$150,000

Question 78

Scenario 14.1 - Vidalia Onions
When Vidalia onions are ready,the entire 13 county (plus parts of seven other counties)area in Georgia where they are grown is devoted to the harvest,packaging and shipping of this delicacy.The Onion Shack currently purchases 120,000 bags of onions each year at a price of $100 per bag (a bag is ten pounds).Onion Shack has historically purchased in lots of 3000 bags.Transit time and capacity vary as indicated in the table.The safety inventory that Onion Shack requires is 30% of lead time demand and the holding cost for a bag is 15% of cost.

Use Scenario 14.1 to determine the in-transit inventory cost of the Anita Enterprises option if the Onion Shack purchases 240,000 bags of Vidalia onions each year.

A)$1936.60
B)$2004.60
C)$1972.60
D)$1864.60

Question 79

Scenario 14.1 - Vidalia Onions
When Vidalia onions are ready,the entire 13 county (plus parts of seven other counties)area in Georgia where they are grown is devoted to the harvest,packaging and shipping of this delicacy.The Onion Shack currently purchases 120,000 bags of onions each year at a price of $100 per bag (a bag is ten pounds).Onion Shack has historically purchased in lots of 3000 bags.Transit time and capacity vary as indicated in the table.The safety inventory that Onion Shack requires is 30% of lead time demand and the holding cost for a bag is 15% of cost.

Use Scenario 14.1 to determine the least expensive transportation option if the Onion Shack purchases 480,000 bags of Vidalia onions each year.

A)Mashburn Rail
B)Sylvia Express
C)Anita Enterprises
D)Smith Trucking

Question 80

Scenario 14.2
SoxyBack,a manufacturer of fancy men's socks worn by fashionable gentlemen everywhere,is located in Oshkosh,Wisconsin.The socks are sold directly to fashion-conscious men all over North America.SoxyBack currently divides the United States into ten territories,each with its own sales force.All product inventories are maintained locally in each territory and replenished from Oshkosh every five weeks using UPS.The average replenishment lead time using UPS is one week.UPS charges at a rate of $0.75 + 0.33x where x is the quantity shipped in pounds.The products sold fall into two categories-Dandy and Popinjay.Dandy products weigh 0.2 pounds and cost $350 each.Popinjay products weigh 0.10 pounds and cost $35 each.
Weekly demand for Dandy products in each territory is normally distributed,with a mean of mH = 3 and a standard deviation of sH = 6.Weekly demand for Popinjay products in each territory is normally distributed,with a mean of mL = 25 and a standard deviation of sL = 6.
SoxyBack maintains sufficient safety inventories in each territory to provide a CSL of 0.975 for each product.Annual holding cost at SoxyBack is 30 percent.In addition to the current approach,the management team at SoxyBack is considering two other options:
Option A: Keep the current structure but replenish inventory once a week rather than once every five weeks.
Option B: Eliminate inventories in the territories,aggregate all inventories in a finished goods warehouse at Oshkosh,and replenish the warehouse once a week.
If inventories are aggregated at Oshkosh,orders will be shipped using FedEx,which charges $7.25 + 0.77x per shipment,where x is the quantity shipped in pounds.The factory requires a one-week lead time to replenish finished-goods inventories at the Oshkosh warehouse.An average customer order is for 1 unit of Dandy and 10 units of Popinjay.
Use Scenario 14.2 to determine the total annual cost of SoxyBack's current system.

A)$90,459
B)$75,994
C)$47,335
D)$42,598