JetFuel Inc. supplies jet fuel to the Seattle Tacoma International Airport. The fuel is picked up from a refinery in tanker trucks and delivered directly to the airport's fuel reservoir. Demand is known due to the scheduled nature of commercial aviation. Problem parameters are given in the table below:
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Distance from refinery to Sea-Tac
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150 miles
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Truck capacity
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5,000 gallons
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Demand per day
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50,000 gallons
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Truck travel speed
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30 miles/hour
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a. Draw a diagram that shows the cumulative number of gallons against time (hours), for one 24 hour period. Assume the refinery only produces fuel for Jet Fuel and this production occurs at a constant rate. Assume consumption at the airport is constant, and the reservoir is never allowed to drop below 10,000 gallons. Inventory held at the refinery can be as little as 0. Trucks are dispatched full.
b. On the diagram, indicate inventory held at the refinery, and inventory held at the airport.
c. Can you identify the time between production and consumption for each gallon of fuel ?
d. How large does our storage capacity need to be at the refinery?
e. Name one change that could be made to this logistics system to reduce transportation cost, and any necessary assumptions.
f. Name one change that could be made to this logistics system to reduce inventory cost, and any necessary assumptions.
g. If the transportation company has ownership of the fuel only between the refinery and the airport (not at the refinery or the airport), would the transportation company decrease logistics cost (sum of transportation and inventory) by shipping more or less frequently?