Problem:
Your options for shipping $100,000 of machine parts from Baltimore to Kuala Lumpur, Malaysia, are
(1) use a ship that will take 30 days at a cost of $3,800, or
(2) truck the parts to Los Angeles and then ship at a total cost of $4,800.
The second option will only take 20 days. You are paid via a letter of credit the day the parts arrive. Your holding cost is estimated at 30% of the value per year.
a) Which option is more economical?
b) What customer issues are not included in the data presented?