CHAPTER 9: SUPPLY CHAIN MANAGEMENT

TRUE/FALSE

1. Materials management involves organizing and coordinating all management functions that are responsible for every aspect of materials movements and transformations.

ANS: T

2. Internal MM systems do not require control of production materials.

ANS: F

3. Logistics which are the tactics of MM production and distribution should always be in harmony with the company’s strategies.

ANS: T

4. Raw materials have value added by the operations. Mining, growing, refining, cleaning, packing and shipping add value.

ANS: T

5. Quality standards for components and subassemblies do not have to be clearly set by the materials manager for the producer.

ANS: F

6. Flow shops require continuous supply of specific sets of unchanging materials.

ANS: T

7. Flow shops, like job shops, have a varied and changing set of materials requirements.

ANS: F

8. Vertical integration is achieved by buying companies able to provide components that are otherwise purchased from suppliers.

ANS: T

9. Companies that can compete globally have achieved an organizational integration of the information required for materials control on a global basis.

ANS: F

10. Purchasing agents and their buying organizations, have the traditional role of bringing needed supplies into the organization.

ANS: T

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11. Purchasing departments in the twentieth century are best described as information-gathering agencies.

ANS: F

12. The price-tag approach has been thrown out in favor of long-term relationships with special, trusted suppliers.

ANS: T

13. The performance of purchasing agents in the supply chain is related to the speed with which goods move out of the warehouse and off the shelves in relation to the amount of inventory that is on hand to be drawn down.

ANS: T

14. DOI (days of inventory) is a measure that is equivalent to dividing total stock on-hand by the average demand per day.

ANS: F

15. Good turnover brings large rewards and a reputation for purchasing success.

ANS: T

16. Purchasing records provide a history of what has been done in the past.

ANS: T

17. The purchasing mission includes achieving deliveries on time, receiving inventories, inspecting all incoming goods, certifying suppliers, and making sure the relationship with trusted suppliers is stable.

ANS: T

18. In the business environment of the United States, personal relationships are not considered to be a reasonable basis for enterprise decisions. They exist nevertheless in less blatant forms than in other cultures.

ANS: T

19. Wal-Mart uses cross-docking to transfer goods from incoming trucks at the receiving dock to outgoing trucks at the shipping docks.

ANS: T

20. Bidding is a process by which the seller requests competing companies to specify how much they will charge for their products.

ANS: F

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21. In bidding, steps must be taken to ensure that quality is not compromised by price considerations.

ANS: T

ANS: F

22. ABC classification of materials is most often done in terms of annual dollar volume. This identifies the most important SKUs as A-class. Increasing numbers of organizations try to prepare for shortage situations by overstocking the C-class of items. (Read Chapter 5 on inventory control.)

ANS: F

23. A variant of the dollar volume ABC classification is based on the criticality of SKUs. The most critical are called A-critical items. (Read Chapter 5 on inventory control.)

ANS: T

24. A possible description of critical parts relates to the probability of total process or product failure when that critical part fails. (Read Chapter 5 on inventory control.)

ANS: T

25. Dollar volume is the surrogate for potential savings that can be made by improving the inventory management of specific materials. (Read Chapter 5 on inventory control.)

ANS: T

26. Certification of suppliers is a process for grading suppliers to ensure that suppliers’ organizations conform to standards that are essential for meeting the buyer’s needs.

ANS: T

27. Certification of suppliers is not expensive or time-consuming.

ANS: F

28. The strategic component came into play during start-up, when deciding what goods were to be made and what services were to be offered.

ANS: T

29. Strategies can be tweaked or changed significantly if they are not delivering according to plans.

ANS: T

30. Value adding occurs when purchased components are further transformed by the company’s production process.

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ANS: T

31. Critical can mean that when a part fails, it causes product or process failure.

ANS: T

34. The bullwhip effect is the amplification of oscillation caused by competitive actions.

ANS: F

35. Simulation is a means for studying the complex interactions of various linkages along the sup-ply chain.

ANS: T

36. The beer game originated at MIT and has since been used to demonstrate how difficult it can be to make good decisions without adequate and current information about what is going on at all points of the supply chain.

ANS: T

37. The distribution chain is another name for the supply chain.

ANS: F

38. The acquisition chain is upstream in the supply chain.

ANS: T

39. Downstream in the supply chain is the distribution chain.

ANS: T

40. Upstream and Downstream are relative terms. What is upstream for one supply chain partici-pant can be downstream for another.

ANS: T

41. The ethics of purchasing is a moral issue and not a legal one in the USA.

ANS: F

MULTIPLE CHOICE

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1. Our company makes an extensive line of products. Marketing lands a big contract for one particular item that normally sells hundreds per year. The new contract is for thousands per year. What is triggered by these marketplace demands?

a. hoarding of such materialsb. internal MM information systemc. materials management systemd. order to complete old work in process

ANS: C

2. The materials management system must be synchronized and coordinated to bea. effective. c. tolerated.b. interlinked. d. computerized.

ANS: A

3. Co-produced products have much of their additional value-added supplied by thea. original producer. c. suppliers.b. original employees. d. game-playing teammates.

ANS: C

4. It is to be expected that analysis will continue to indicate that materials have the _____ leverage for making cost savings.

a. greatest c. leastb. most variable d. more flexible

ANS: A

5. Penalties for mistakes made in ordering materials (generally) do not depend on a. the kind of product, e.g., freshness dating.b. the life-cycle stage of the product.c. the process configuration being used.d. the software order-placing system.

ANS: D

6. _____ are needed to evaluate and balance the disadvantages of having large amounts of stock on-hand (SOH) against the benefits of large order quantities placed long in advance of delivery so that substantial quantity discounts can be obtained.

a. Life-cycle models c. Order size modelsb. Trade-off models d. all of the above

ANS: B

7. _____ involve smaller order quantities of far more kinds of materials than _____.a. Job shops; flow shops c. Flow shops; job shopsb. Flexible shops; flow shops d. Job shops; intermittent flow shops

ANS: A

8. The cost of materials is often less crucial than _____

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a. on-time delivery. c. carrying costs.b. project completion date. d. TQM.

ANS: A

9. Management issues such as what items to buy, when to buy them, from whom to buy, how much to buy at one time, and how much to pay, are captured by what systems?

a. expediting systems c. linear programming systemsb. intelligent information systems d. purchasing discount systems

ANS: B

10.Which function is part of the responsibilities of the materials control department?a. inspecting incoming materialsb. expediting flowsc. arranging for and regulating shipmentsd. international accounts payable departmente. all of the above

ANS: E

11._____ has become a global system.a. Freshness dating c. Out-sourcingb. EDI use d. Invoicing

ANS: C

12.What captures the essence of supply chain objectives regarding throughput and value added?a. turnover d. both b and cb. inventory turns e. both a and bc. number of links in the chain

ANS: E

13.Failing to achieve high turnover rates can be caused bya. carrying excessive inventories.b. overestimating demand.c. prices being too high for customers.d. smart competitive moves.e. all of the above

ANS: E

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14._____ provide a useful history of _____.a. Purchasing records; discounts obtainedb. Suppliers records; days of inventory (DOI)c. Accounting records; inventory turnsd. Quality control records; purchase pricese. Legal records; ethical issues

ANS: A

15.Coordinating the goals of materials management with those of process management is one of the greatest responsibilities of the _____

a. CEO. d. legal department.b. P/OM department. e. marketing department.c. CFO.

ANS: B

16.It is neither ethical nor legal for vendors to use bribes to influence purchasing decisions in _____a. Japan. c. the U.S.A.b. Argentina. d. Egypt.

ANS: C

17.The receiving facility is often called the _____, and another location for shipping is called a _____.a. shipping dock; receiving dockb. receiving dock; shipping dockc. cross-docking block; dock-crossing blockd. receiving distribution center; shipping floor

ANS: B

18.Cross-docking is the transfer of goods from _____a. incoming trucks at receiving docks to outgoing trucks at shipping docks.b. incoming trucks at receiving floors to forklift trucks on the shipping floors.c. incoming trucks at shipping docks to outgoing trucks at receiving docks.d. outgoing trucks at shipping docks to incoming trucks at receiving docks.

ANS: A

19.Bidding models show that as the number of bidders competing _____, the size of the winning bid decreases.

a. decreases c. increasesb. changes d. is unknown

ANS: C

20.Material shortages hit particularly hard at the _____, because it has the least flexibility in adapting to changes in the use of materials.

a. flow shop c. custom shopb. job shop d. general-purpose equipment shop

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ANS: A

21.The ABC classification for materials is best described by the _____.a. probability of parts failing in rank order from highest to lowestb. dollar volume of inventory items in rank order from highest to lowestc. important many and the trivial fewd. trivial many versus the even more trivial few

(Read Chapter 5 on inventory control.)

ANS: B

22.Critical parts refers toa. parts that shut down the line or seriously delay project completion.b. parts that combine in many critical ways to form modular systems.c. products that impact the bottom line in such a way as to cause bankruptcy if projections

are not achieved.d. products that require special coordination between marketing and P/OM for their

successful introduction.

ANS: A

23.In what way can suppliers be monitored for their compliance with total quality management programs?a. ISO 9000 standardsb. Baldrige Awards—award criteriac. Lead time management programs.d. all of the abovee. none of the above

ANS: D

24.The step-by-step procedure for dealing with criticality relationships is:a. Systematically rank order parts by their cost; list the most expensive parts—costly spare

parts must be shared between depots; inspect spare parts regularly.b. Make sure to list all critical parts; rank order all critical parts according to their level of

criticality; provide spare parts and backup materials for the most critical parts; regularly inspect spare parts.

c. Regularly inspect spare parts; list the most critical parts; rank order parts according to their criticality; provide spare parts and backup materials.

d. Rank order parts according to their criticality; list the most critical parts; provide spare parts and backup materials; regularly inspect spare parts.

ANS: B

25.MM connects the _____ sourcing of supplies to the _____ scheduling of product to be delivered to the customer.

a. external; internal c. efficient; inefficientb. internal; external d. none of the above

ANS: A

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26._____ occurs when purchased components are further transformed by the company’s production process.

a. Acquisition c. Value Addingb. RM d. Extraction

ANS: C

27.Organizations that are in the business of supplying raw materials at the very start of the upstream acquisition process are themselves dependent on

a. purchasing. c. acquisition.b. forecast. d. both a and c

ANS: A

28.Components (C) and subassemblies (SA) are purchased materials that have _____ value added than the raw materials of which they are made.

a. less c. sameb. greater d. none of the above

ANS: B

29.Analysis is based on running the numbers for alternative taxes and _____ in the countries where finished goods are purchased and sold.

a. demand c. tariffsb. WIP d. production capacity

ANS: C

30.It is to be expected that analysis will continue to indicate that for most suppliers, their materials costs have averaged _____ their labor costs.

a. less than c. the same asb. more than d. none of the above

ANS: B

31.Alternatively, carrying large amounts of inventory can be _____, requiring more storage space than is justified, and running up carrying costs.

a. necessarily costly c. unexpectedly inexpensiveb. unpredictable d. unnecessarily costly

ANS: D

32._____ is reflected in the dollar demand, which is a good measure of item importance.a. Frequency of usage c. Forecastingb. Quality d. WIP

ANS: A

33.Expectations of buyers for the performance of their suppliers change when there is continuity of theira. supply coordination. c. none of the aboveb. supply-and-demand relationship. d. both a and b

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ANS: B

34.Companies that can _____ have achieved an organizational integration of the information required for materials control on an international basis.

a. compete locally c. both a and bb. compete globally d. neither a nor b

ANS: B

35._____ purchasing may not be best for every organization, but it is more likely to be the best approach when the information systems infrastructure supports a global network.

a. Centralization of c. Information planning forb. Downsizing of d. Outsourcing of

ANS: A

36._____ means following up on orders and doing whatever can be done to move materials faster.a. Last-in first-out c. Expeditingb. First-in first-out d. WIP

ANS: C

37.The importance of the buying function depends upon the extent to which the company requiresa. suppliers. c. raw materials suppliers.b. outside suppliers. d. all of the above

ANS: B

38.The performance of the _____ in the supply chain is related to the speed (or velocity) with which goods sell and amount of inventory that is on hand to be drawn down.

a. purchasing agent c. marketing managerb. company lawyer d. WIP manager

ANS: A

39.Bullwhip effect refers to a. shortages c. both a. and b. b. overstock d. safety stock

ANS: C

40.Simulation is used toa. demonstrate the damping effect of good purchasing decisions b. the flow of materials upstream c. the flow of materials downstream d. effect of purchasing decisions on SOH

ANS: D

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41.The beer game is so named because: a. the distribution of beer is complex, b. the first application of simulation to the acquisition chain was Budweiser, c. students understand the product, d. the creators at MIT named it that way

ANS: D.

SHORT ANSWER

1.Explain analytic processes. How are they different from synthetic processes?

ANS:The text does this very well, so we will take a look at one particular aspect at this time.

The analytic process start with tons of raw materials and reduces them to smaller amounts of work-in-process based on the thought that less bulky goods require less storage space. The opposite effect occurs for many manufactured products, which employ synthetic processes. They assemble components into bigger and heavier subassemblies and eventually finished products like farm tractors, diesel locomotives, automobiles, and commercial airliners. There is clearly an advantage in having such large and heavy finished goods near to their marketplace so they do not have to be transported great distances to the customers.

2.To which geographic location has outsourcing moved the labor component?

ANS:In the 1990s, outsourcing the labor component meant moving plants to Mexico. Later, the plants were moved to Thailand, Indonesia, Pakistan, Taiwan, and the Republic of China. There have been rotations from one location to another as problems have surfaced in locations that are far from corporate headquarters. At the current time, China has become one of the largest sources for labor-intensive production. India has the award for information services and software.

3.When purchasing is a centralized operation that buys for many different subsidiaries, problems can surface because some like what they get and others do not. What should be done to prevent antagonism under such circumstances?

ANS:When there is antagonism between the buyers and those for whom they buy, many problems can surface. To prevent this from happening, close communication must be established and the needs of all parties taken into consideration. Working with purchasing, a good relationship should be established between subsidiaries and the suppliers. There is increasing belief in a materials system with fewer suppliers and a greater trust relationship between all parties.

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4.The determination of what to make and what to buy depends on what factors?

ANS:The importance of the buying function depends upon the extent to which the company requires outside suppliers. The determination of what to make and what to buy is a P/OM decision; however, purchasing department information can be crucial. It is evident that the decision often depends on the terms to buy, including price, quality, delivery, and innovations, among others, which purchasing learns about and communicates the P/OM team. There is also a need to know about new technology that makes buying from someone a knowledge drain which cannot be supported.

5.What happens to large unsold inventories?

ANS:Fashion is fickle. Women’s clothing styles change in complex ways. Manufacturers have been caught with large unsold inventories as a result of committing to a style that did not gain acceptance. When turnover is poor for retail or mail order, the goods are marked down and sold quickly at large discounts that provide no profit, and often at a loss. Books and toys that do not sell are marked down and remaindered.

6.How is DOI calculated?

ANS:DOI is equivalent to dividing total stock on-hand by the average demand per day.It is the expected length of time before running out of stock—if no further stock is added. DOI changes when new stock is added (DOI goes up) and when daily demand speeds up (DOI goes down). When daily demand slows down (DOI goes up). Read Chapter 5 on inventory control.

7.What are Purchasing Records?

ANS:Purchasing records provide a history of what has been done in the past. Documenting history is useful, including what the costs were, who the major suppliers were, what discounts were obtained, what quality levels achieved, and delivery periods for specific items. Without documentation, the supplier history of a company can be lost. At the same time, the history must be updated regularly since things change at a rapid rate.

8.Name some of activities accomplished by the purchasing mission.

ANS:Purchasing is usually responsible for the following functions, which might be called the purchasing mission: Ordering what is needed in the right quantities and then meeting all quality standards at the best possible prices—always achieving delivery reliability. This mission must be coordinated with P/OM and marketing with respect to what is going to be needed when. Purchasing must be assisted by P/OM in predicting the amount of scrap. By increasing order sizes to compensate, costly reorders can be avoided for a small number of units needed to complete orders. Receiving inventories is part of the materials management function. Often, but not always, “receiving” is the responsibility of purchasing. Some organization must determine that deliveries are on time and that P/OM will have what it needs as it schedules production runs.

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Will just-in-time be used, or will extra stock be carried just-in-case? These decisions require communication and coordination between P/OM and the PAs. It is essential to inspect the incoming goods to make sure that their qualities meet specifications, and that the right quantities have been delivered. Purchasing is a specialist in knowing which suppliers to use. Sometimes, the PAs are in charge of certification of suppliers. See Enrichment Activity 12. Keep in touch with change. That is essential. Purchasing is the materials management function to consult when engineering design changes (EDCs) occur that demand changes in the specifications of purchased materials. What happens to the stock on-hand that is outmoded? How fast can the new specifications be made and shipped? If the company is constantly changing designs (which many are doing) then knowing which suppliers can cope with shifting demands is crucial. Stability of supply relationships can have inestimable value. Purchasing must be adept at coordinating the materials that are needed for start-ups. The management dynamics that are associated with start-ups are entirely different from those that operate successfully for mature products.

9.Are legal contracts just as important in Japan as they are in the USA? What about China?

ANS:There is a cultural difference in the importance of legal contracts in the United States as compared to many other countries. For example, on a per capita basis, Japan has about 6 percent of the lawyers that practice in the United States. The Chinese do not value legal contracts in the same way that the United States does. These differences have significant impact on the way P/OM proceeds in other countries. We are just learning about China. It seems that politicians in the government have rules and laws that they uphold. American lawyers do not know very much about all that, but although the learning curve is steep, there is much learning going on.

10. Explain cross-docking.

ANS:Cross-docking is transferring goods from incoming trucks at the receiving dock to outgoing trucks at the shipping docks. This means that a large percentage of goods never enters the warehouse but crosses from one dock to the other. Such cross-docking has been credited with saving substantial amounts of money and time. It is often cited as an example of how P/OM’s creativity improved the logistics of distribution operations.

11. Explain the bullwhip effect. ANS: When SOH and orders for replenishment are not transparent along the supply chain, there is an amplification of corrective actions which without proper feedback create increasing oscillations of over and under stock conditions. The amplification of these distortions is the reverse of what is needed which is damping of wild swings through feedback of information.

12. Downstream and upstream are obvious references to flow patterns of rivers. How is that relevant to supply chains? ANS: There are many similarities. The headwaters are where the rivers start. They are the sources of the most basic materials that eventual get transformed into components and ultimately airplanes that fly and autos that drive. Mining, agriculture and forestry are good analogs for the headwaters. Moving downstream the analogies continue until eventually, way downstream, the rivers empty into the oceans which is where the final consumers get delivery

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PROBLEMS

1. Assume that downsizing could save the EnviroGuard Pest Control $10,000 in annual labor costs. The downsizing study costs $25,000. If, instead, the study focused on materials savings, what would be the net payoff for the first year? Assume that average firm ratios for labor and materials costs apply. Also, assume that $25,000 will cover the cost of either the labor study or the materials study but not both. Hint: material costs average about three times labor costs.

ANS:Since material costs average about three times labor costs, the savings in material cost would be $10,000 x 3 = $30,000. The materials savings study cost is $25,000 so the net payoff is $5,000. It is recommended to study materials savings.

2. If the ratio of labor costs to materials costs is 1/4 and labor costs are decreasing by 20 percent per year while material costs are increasing by 10 percent per year, what is the ratio at the end of the second year? (Note: This means that at the present time labor costs are 25 percent of materials costs.)

ANS:At present: Labor costs (L)/Material costs (M) = L/M = 0.25

Labor costs two years from now are L* = (.80)(.80)L = 0.64L

Material costs two years from now are M* = (1.1)(1.1)M = 1.21M

Thus the ratio of L*/M* = 0.64L/1.21M = (0.64/1.21) x L/M = 0.5289 .25 = 0.132This is equivalent to a ratio of about 1:7.6. Material costs have become much more significant in the two year period.

3. If labor is 20 percent and materials 80 percent of COGS—say $20 and $80, then a 10 percent reduction in labor costs yields $18 added to $80 totals $98. This produces a 2 percent reduction in total costs [i.e., (100 – 98)/100 = 0.02]. Make the same comparison for a 20 percent reduction in materials costs.

ANS:Applying the 20 percent reduction to materials cost, starting with $20 for labor and $80 for materials makes them now $20 for labor and $64 for materials for a total of $84. Thus the reduction in total cost is ($100-$84)/100 = 0.16 or 16 percent.

That is great leverage for the value of material reductions. A 20 percent reduction in material costs results in a 16 percent reduction in total costs, whereas, a 10 percent reduction in labor costs results in a 2 percent reduction in total costs. Go for the materials savings.

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4. Calculate the inventory turnover rate when monthly net sales are $100 million and average inventory evaluated at the selling price is $225 million. What might this product be and comment on this level of turnover for such a product.

ANS:Inventory Turns = Annual Net Sales/Average Inventory Per Year

= 12(100)M/225M= 5.33 turns per year

This could be typical of suites of furniture in a relatively high-priced showroom. Thomasville Furniture targeted the goal of eight inventory turns some years ago and it may have been achieved.

5. Calculate the days of inventory (DOI) if average inventory is $100 million (calculated in terms of costs) and the monthly cost of goods sold (COGS) is $85 million. Use 30 days per month.

ANS:DOI is calculated as: Average Dollar Inventory/Cost of Goods Sold Per Day

DOI = $100 M/($85 M/30 days) = $100 M/(2.833) = 35.29 days of inventory (which is roughly equivalent to 10 turns per year {365 days per year/35.29}).

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6. Use the weighted sum method to score the vendors in the table below and compare the results..

Vendor Scoring Certification ModelWeights add to 100; Best cell score is 10; Best total score is 1000.

Factors Weights Vendor A Vendor B Vendor C Vendor D

Price/unit (1) 20 6 10 4 5

Average Quality Level (2) 25 5 8 7 3

Quality Consistency (3) 10 6 7 6 8

Delivery LT (4) 7 7 6 4 2

JIT ability (5) 2 3 3 7 4

Design Flexibility (6) 3 4 4 6 5

Design Change Speed (7) 5 5 5 5 6

Product line Diversity (8) 8 7 3 7 7

Services Promised (9) 9 8 3 6 8Attitude Perceived (10) 11 2 5 5 1

Weight and Factor Scales used: 1 to 10 for each cell entry; 10 being best.

ANS;Vendor A Vendor B Vendor C Vendor D

Answer 100 547 661 565 461Vendor B with a total score of 661 is the best; followed by Vendor C(565) and Vendor A (547). Ven-dor D is the worst at 461.

See Excel File “TB: Ch. 10 Facilities Problem 9” for detailed calculations.Additional problems can be generated by changing the values of the variables.

7. Consider the data given in the following table and find the optimal distribution policy.

Distributors

A B C D Capacity

Plants

P1 $3.00 $3.00 $2.50 $1.50 25,000

P2 $1.00 $2.50 $2.25 $3.00 40,000

P3 $2.50 $1.50 $4.00 $3.00 30,000

Demand 25,000 13,500 21,800 34,700

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Distributors

A B C D Total Shipped

Constraint Type Capacity

Plan

tsP1 0 0 0 25,000 25,000 = 25,000

P2 18,200 0 21,800 0 40,000 = 40,000

P3 6,800 13,500 0 9,700 30,000 = 30,000

Total Re-ceived 25,000 13,500 21,800 34,700 95,000 95,000

Constraint Type = = = =

Demand 25,000 13,500 21,800 34,700 95,000

Unit Cost of Transportation

A B C D

Plan

ts

P1 $3.00 $3.00 $2.50 $1.50

P2 $1.00 $2.50 $2.25 $3.00

P3 $2.50 $1.50 $4.00 $3.00

Total Transportation Cost

A B C D Total Cost

Plan

ts

P1 $0 $0 $0 $37,500 $37,500

P2 $18,200 $0 $49,050 $0 $67,250

P3 $17,000 $20,250 $0 $29,100 $66,350Total Cost $35,200 $20,250 $49,050 $66,600 $171,100

See Excel File “TB SCM Transportation Model Problems 8 & 9” for detailed calculations.Additional problems can be generated by changing the values of the variables.

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8. Find the optimal solution to problem 8 if the shipment from P1 to D is not feasible.

ANSSince P1 to D is not feasible, make cost from P1 to D very high, say 99,000 and solve the problem.The solution is given below.

Distributors

A B C D Total Shipped

Constraint Type Capacity

Plan

ts

P1 0 3,200 21,800 0 25,000 = 25,000

P2 25,000 0 0 15,000 40,000 = 40,000

P3 0 10,300 0 19,700 30,000 = 30,000

Total Re-ceived 25,000 13,500 21,800 34,700 95,000 95,000

Constraint Type = = = =

Demand 25,000 13,500 21,800 34,700 95,000

Unit Cost of Transportation

A B C D

Plan

ts

P1 $3.00 $3.00 $2.50 $99,000.00

P2 $1.00 $2.50 $2.25 $3.00

P3 $2.50 $1.50 $4.00 $3.00

Total Transportation Cost

A B C D Total Cost

Plan

ts

P1 $0 $9,600 $54,500 $0 $64,100

P2 $25,000 $0 $0 $45,000 $70,000

P3 $0 $15,450 $0 $59,100 $74,550Total Cost $25,000 $25,050 $54,500 $104,100 $208,650

See Excel File “TB SCM Transportation Model Problems 8 & 9” for detailed calculations.Additional problems can be generated by changing the values of the variables.

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