Innovation Distribution Co Supply Chain Risk Essay

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Total Length: 1978 words ( 7 double-spaced pages)

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A Total Cost Approach to Understanding Supply Chain Risk



Using the current exchange rate, what is the initial purchase cost per unit (in U.S. dollars) paid to Dong Hai Supply? (Do not include transportation costs.)



The exchange rate between the U.S. Dollar and the Chinese Renminbi is:



Dollar = 6.92 CNY China Yuan Renminbi



CNY China Yuan Renminbi = 0.1445 U.S. Dollar



The quoted price by Dong Hai Supply at the factory is 547 China Yuan Renminbi. Therefore, the initial purchase cost per unit is



The initial purchase cost is $79.04 for every unit (Frankel, 2013).



What is the average time for an order filling a TEU container to come from Dong Hai Supply in Chengdu, China, to IDC's Alliance Fort Worth Distribution Center? From CousinsAg in Wahoo, Nebraska, to IDC's Alliance Fort Worth Distribution Center?



Dong Hai Supply to Alliance Fort Worth Distribution Center



Dong Hai Supply order processing time = 15 days



From Chengdu rail to Port of Shanghai = 1 day



Loading at the Port of Shanghai = 4 days



Transit on ocean between Port of Shanghai to Port of Long Beach = 16 days



The unloading period at Port of Long Beach = 3 days



Time from Rail Port of Long Beach to Alliance Fort Worth = 4 days



Therefore, the total lead time for the supplier is 43 days.



For Chinese Supplier



Mean



Variance



Standard Deviation



Dong Hai Supply order processing time



15



0



From Chengdu rail to Port of Shanghai



1



0.4



Loading at the Port of Shanghai



4



2



Transit on ocean between Port of Shanghai to Port of Long Beach



16



8



The unloading period at Port of Long Beach



3



1.5



Time from Rail Port of Long Beach to Alliance Fort Worth



4



0


43



11.9



3.449638



Actual Days in Transit



28



The standard deviation as calculated above is 3.

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45 days.



ii. From Cousins Ag to Alliance Fort Worth Distribution Center



Cousins Ag order processing time = 10 days



Rail from Wahoo to Alliance Fort Worth = 5 days



Therefore, total lead time is a period of 15 days.



For United States Supplier



Mean



Variance



Standard Deviation



Cousins Ag order processing time



10



1



Rail from Wahoo to Alliance Fort Worth



5



0.3



15



1.3



1.140175



Actual Days in Transit



5



Therefore, the average time for an order filling a TEU container to come from Dong Hai Supply to the distribution center in Alliance Fort Worth is 43 days whereas from Wahoo, Nebraska to the distribution center in Alliance Fort Worth is 15 days.



3. Using the current exchange rate, what is the cost (in U.S. dollars) to ship a TEU container from Dong Hai Supply in Chengdu, China, to IDC's Alliance Fort Worth Distribution Center?



China



United States



TEU cost from Chengdu Shanghai to Long Beach



Import tariffs and duties



Rail Cost from Port of Long Beach to Alliance Fort Worth



Transportation Cost



Therefore, the total cost altogether is $1,793.90 + $325 + $2,250 = $4,368.90



4. What is the economic order quantity (use unit price only; do not include transportation costs) if we purchase everything from CousinsAg? From Dong Hai Supply?



The Economic Order Quantity is the number of units that a firm ought to add to its inventory with every particular so as to minimize the total costs of inventory, which include shortage costs, holding costs and ordering costs (Shim and Siegel, 1999). The following calculation outlines the EOQ for Cousins Ag and Dong Hai Supply.



Dong Hai



Cousins Ag



Price per unit



80.11



85



Annual Demand



21,500



21,500



Ordering Cost



Carrying.....

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References


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

Shim, J. K., & Siegel, J. G. (1999). Operations management. Barron's Educational Series.

Wieland, A. (2013). Selecting the right supply chain based on risks. Journal of Manufacturing Technology Management, 24(5), 652-668.

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