Innovation Distribution Co. Supply Chain Risk Case Essay

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Innovation Distribution Company: A Total Cost Approach Understanding Supply Chain Risk Case



The initial purchase cost per unit paid to Dong Hai Supply is calculated as follows. The current exchange rate is 1 CNY China Yuan Renminbi = 0.14646 U.S. Dollar. As pointed out, the price per unit in Dong Hai supply is 547 ¥.



Therefore, the price per unit is 547 x 0.14646 = 80.11362.



The initial purchase cost per unit in U.S. Dollars is $80.11 (Frankel, 2013).



The average time for an order filling a TEU container to come from Dong Hai Supply in Chengdu, China to the distribution center in Alliance Fort Worth



Dong Hai Supply in Chengdu, China to the distribution center in Alliance Fort Worth



Mean



Variance



Standard Deviation



Time for processing and manufacturing order at Dong Hai



Moving Container by Rail from Chengdu to Shanghai



Loading to ship at Port of Shanghai



Pacific Ocean to Port of Long Beach



Clearing Customs and Unloading at Long Beach



Long Beach to Alliance Fort Worth



4



Total lead time for Dong Hai



43



11.9025



3.45



Actual Days for order in Transit



28



Therefore, the average time is 43 days.



ii. The average time for an order filling a TEU container to come from CousinsAg in Wahoo, Nebraska to the distribution center in Alliance Fort Worth



CousinsAg in Wahoo, Nebraska to the distribution center in Alliance Fort Worth



Mean


Variance



Standard Deviation



Time for processing and manufacturing order at CousinsAg



10



From supplier to Alliance Fort Worth



5



Total lead time for CousinsAg



15



1.2996



1.14



Actual days for order in Transit



5



Therefore, the average time is 15 days.

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Question 3



The cost to ship a TEU container from Dong Hai Supply in Chengdu, China, to IDC's Alliance Fort Worth Distribution Center.



IEC charges ¥ 12,414.5 for each TEU shipped. Import tariffs and duties are $325 per TEU and shipping cost from Long Beach to AFW is $2,250.



Remember, 1 CNY China Yuan Renminbi = 0.14646 U.S. Dollar or use the $80.11 rate. Therefore, the IEC charge in dollars is 12,415.5 x 0.14646 = 1,818.23. The total cost is calculated as follows:



Transportation Cost from Dong Hai Supply to Alliance Fort Worth



TEU Shipment Charge



$1,818.23



Import tariffs and duties per TEU



$325.00



Rail Shipping Cost Long Beach to AFW



$2,250.00



Total Transportation Cost



$4,393.23



Hence, the total transportation cost for shipping a TEU container from Dong Hai Supply to AFW distribution center is $4,393.23.



Question 4



Economic order quantity (EOQ) can be delineated as the inventory order quantity level that diminishes the total cost of inventory, with regard to the most significant costs, which are carrying costs and ordering costs (Coyle et al., 2016).



i. Economic Order Quantity if we purchase everything from CousinsAg



CousinsAg



Annual Demand



21,500



Ordering Cost



$105.00



Carrying Cost



32.20%



EOQ



Thus, the EOQ is 406 units



ii. Economic Order Quantity if we purchase everything from Dong Hai Supply



Dong Hai Supply



Annual Demand

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References

Coyle, J. J., Langley, C. J., Novack, R. A., & Gibson, B. (2016). Supply chain management: a logistics perspective. Nelson Education.

Frankel, R. M. (2013). The definitive guide to supply chain best practices: comprehensive lessons and cases in effective SCM. Pearson Education.

Manuj, I., & Mentzer, J. T. (2008). Global supply chain risk management strategies. International Journal of Physical Distribution & Logistics Management, 38(3), 192-223.

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