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The item-A passes through a four stage (echelon) supply chain. Refer the schematic Supply chain diagram presented below. Item-A is assembled in a plant, shipped to its distribution centre (plant DC) for storage and waiting for a Retailer DC’s order for supply. The retail store then places order to its Retailer DC to get the merchandise shipped.
1. | Days of supply | 0 | 60 | 45 | 30 |
2. | Direct material, labour and overheads to assemble (direct cost) | $500 | $500 | $500 | $500 |
a. | Freight (given) | $0 | $75 | $75 | $75 |
c. | Space ($0.25/sq.ft/month x20sq.ft x12 months) | $0 | $5 | $5 | $5 |
Consider the following assumptions/data:
Calculate the carrying cost (L11) for Plant DC, Retailer DC and Retailer. Calculate the values in the rows above to arrive at the answer.
What’s your explanation on the carrying cost for four locations
ABC Analysis and classification
Item code
(C1) | Item code
(C2) | Volume (unit)
(C3) | Unit cost ($)
(C4) |
1 | A1 | 600 | 14.17 |
2 | A2 | 2000 | 0.60 |
3 | B1 | 250 | 0.60 |
4 | B2 | 350 | 42.86 |
5 | C1 | 1000 | 12.50 |
6 | C2 | 1550 | 17.00 |
7 | D1 | 500 | 154.00 |
8 | D2 | 100 | 8.50 |
9 | E1 | 1200 | 0.42 |
10 | E2 | 1000 | 90.00 |
Item code | Item code | Volume | Unit cost | Dollar value ($) | Dollar value | % of total dollar value | Cumulative % dollar value | Classify as A/B/C item | Item cumulative |
(C1) | (C2) | (C3) | (C4) | (C5)=c3 x c4 | (C6) | (C7) | (C8) | (C9) | (C10) |
1 | A1 | 600 | 14.17 | 8502 | 90000 | 38.78% | 90000 | B | 38.78% |
2 | A2 | 2000 | 0.6 | 1200 | 77000 | 33.18% | 167000 | B | 71.97% |
3 | B1 | 250 | 0.6 | 150 | 26350 | 11.35% | 193350 | A | 83.32% |
4 | B2 | 350 | 42.86 | 15001 | 15001 | 6.46% | 208351 | A | 89.78% |
5 | C1 | 1000 | 12.5 | 12500 | 12500 | 5.39% | 220851 | A | 95.17% |
6 | C2 | 1550 | 17 | 26350 | 8502 | 3.66% | 229353 | A | 98.83% |
7 | D1 | 500 | 154 | 77000 | 1200 | 0.52% | 230553 | A | 99.35% |
8 | D2 | 100 | 8.5 | 850 | 850 | 0.37% | 231403 | A | 99.72% |
9 | E1 | 1200 | 0.42 | 504 | 504 | 0.22% | 231907 | A | 99.94% |
10 | E2 | 1000 | 90 | 90000 | 150 | 0.06% | 232057 | A | 100.00% |
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