Scheduling problem
This study analyzes how a buying agent serves as an export-import link between the manufacturer of Asian goods and the retail companies in the West. The agent needs to ship fashion and seasonal apparel from Location A (Singapore) to Location B (Vancouver, Canada). The product orders are shipped from a distribution center in Hong Kong through water transportation modes.
The manager of the buying agent in Location A (Singapore) must commit to shipyard (seaport) deadlines (date and time) for the order shipment. The procurement from local manufacturers in Location A are maintained to accommodate the shipping schedule, which ultimately confirms the due dates assigned by the retail companies at the location B (Vancouver, Canada). If the orders miss their scheduled dates to reach the shipyard (seaport) by a day or few hours shipping cannot be guaranteed. Once a shipment schedule is missed, it may take 2-10 businesses days to get the next scheduled shipping date. Therefore, the agent informs the cut off days to the area manufacturers based on the best shipping schedule that minimizes the shipping cost while maintaining the designated due dates set by the retail companies.
The cost ($) of products is wire transferred to the Agent upon receiving the product. Therefore, some indirect holding (carrying) cost incurs during the shipment lead time period. If a shipping date is missed, this leads to additional holding cost as well as the risk of missing the retailers due date. The cut-off dates are considered the most sensitive issues to minimize shipping cost and business commitments.
Assuming that the cut-off dates are maintained, the Agent must choose between two shipping companies and four alternatives. Suppose the agent ships 20 different products, a total of two million items per month, which requires about 300 containers. The shipments lead time between seaports in Location A to seaport in Location B requires 22-25 days for standard shipping and 30-32 days for basic shipping and handling.
A decision between 2 shipping companies (shipper-X and shipper-Y) and two alternatives - standard (Std) and basic (Basic) need to be made.
- 15 days expedited rate: X for $7500 and Y for $7250
- Shipper-X offers a 25-day (std) rate of $4400, and 32-day (basic) rate of $4000
- Shipper-Y offers a 21-day (std) rate of $4600, and 30-day (basic) rate of rate of $3940
- 300 TEU (twenty-foot equivalent unit) containers to be shipped, each container's estimated product value is $200,000.
- Annual holding cost is 30% of product-value. Answer the following:Which shipping alternative is better? Show the detail of the work, no answers only!
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X
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Y
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Option
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Cost
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Option
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Cost
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15 days
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-
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15 days
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-
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25 days
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-
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21 days
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-
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32 days
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-
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30 days
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-
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Hints: Given: Q= 300 containers/month = 10 container/day
Estimated product value = $200,000 per container
Annual Holding Cost (H) = 30% (Estimated product value)
Find, H per day = [10]*[ H/365] = $ /day
Total Cost (TC) = Fixed Shipping Rate + Holding cost (H) per day *(No. of days)