Handfields holding cost is 35 annually for this kind of, Business Management

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Handfields holding cost is 35 annually for this kind of

Monczka-Trent Shipping is the logistics vendor for Hand field Manufacturing Co. in Ohio. Hand field has daily shipments of a power-steering pump from its Ohio plant to an auto assembly line in Alabama. The value of the standard shipment is $250,000. Monczka-Trent has two options:

(1) its standard 2-day shipment or

(2) a subcontractor who will team drive overnight with an effective delivery of one day. The extra driver costs $175. Handfield's holding cost is 35% annually for this kind of inventory.

a) Which option is more economical?

b) What production issues are not included in the data presented?

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