Nittany Fans:
Nittany Fans of Lewistown, Pennsylvania is a distributor of industrial fans utilized in plants, warehouses and other industrial facilities.
The fans are manufactured in Neenah, Wisconsin, and presently shipped to Lewistown through rail transportation.
Kenny Craig, vice president of logistics, has asked his staff to assess by using motor carrier service to ship the fans.
Nick Gringher, director of distribution, has collected the given information:
Nittany Fans: Data
Annual demand 36,000 fans
Fan value (price) $ 4,000
Inventory carrying cost annually 25%
Cost per order to accomplish inventory $ 200
In-Transit inventory carrying cost 15%
Order cycle time using rail 4 days
Order cycle time using motor carrier 2 days
Rail rate $ 1.00 per cwt
Motor carrier rate $ 1.25 per cwt
Unit weight 250lbs per fan
Nittany Fans: Questions
Question 1: Determine the economic order quantity for Nittany Fans in units? In pounds?
Question 2: What is the total cost (w/o transportation) of the EOQ?
Question 3: Find out the total cost for using the rail transportation?
Question 4: Find out the total cost for using the motor carrier transportation?
Question 5: Which alternative must Nittany Fans use?