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Supply Chain Management Case

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Melissa Harvey

Supply Chain Management 320

1.) I would highly recommend Jim Beierlein to implement the transportation via Air.   I used long run/dynamic analysis to arrive at my conclusion.  From the analysis we can safely say that up to and including the breakeven point of approximately 2,952,756 pounds of demand per year Air would be the most cost efficient and effective method of delivery for Senco. Because SENCO is a growing company and the projected growth annually is around 5%, after the 3rd year and into the 4th year the expected weight in pounds is going to surpass the Breakeven point.  At this point SENCO should reconsider their modes of transportation.

Yocean= (823,000-600,000)/2,500,000= .0892

Yocean=600,000+.0892x

Yair= (800,000-450,000)/2,500,000=.1400

Yair= 450,000+.1400x

2.) Break even pounds per year was 2,952,755.90.  This is the pound level at which the company would be in different about which system they would choose.  

600,000+.0892x=450,000+.1400x

(600,000-450,000)/ (.1400-.0892)=150,000/.0508

= 2,952,755.91

3.

Pounds

Ocean

Air

1000000

689200

590000

1500000

733800

660000

2000000

778400

730000

2500000

823000

800000

3000000

867600

870000

4000000

956800

1010000

4500000

1001400

1080000

5000000

1046000

1150000

5500000

1090600

1220000

[pic 1]

4.

Year

Projected growth during year

Total Weight in pounds projected during year

1

125000

2625000

2

131250

2756250

3

137812.5

2894062.5

4

144703.125

3038765.625

5

151938.2813

3190703.906

By the end of the 4th year the projected growth will exceed the point of indifference making Air the less cost effective mode of transportation.  SENCO would then have to reconsider warehousing costs and a higher cost of inventory to accommodate the demand in America when/if they decide that the ocean is a more cost effective mode of transportation.  

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