Home Work Chapter 1 to 7
Book: Business Logistics/Supply Chain Management Ronald H. Ballou
Student Name: Shaheen Sardar
Course Name: Logistics Management
Department: Industrial and Management Engineering, Hanyang University, South Korea.
Home Work 1
Chapter 1: Business Logistics/Supply Chain
Question 12: Suppose that a manufacturer of men's shirts can produce a dress shirt in its Houston, Texas, plant for $8 per shirt (including the cost of raw materials). Chicago is a major market for 100,000 shirts per year. The shirt is priced at $15 at Houston plant. Transportation and storage charges from Houston to Chicago amount to $5 per hundredweight (cwt.). Each packaged shirt weighs 1 pound.
As an alternative, the company can have the shirts produced in Taiwan for $4 per shirt (including the cost of raw materials). The raw materials, weighing about 1 pound per shirt, would be shipped from Houston to Taiwan at a cost of $2 per cwt. When the shirts are completed, they are to be shipped directly to Chicago at a transportation and storage cost of $6 per cwt. An import duty of $0.50 per shirt is assessed.
(a) From a logistics-production cost standpoint, should the shirts be produced in Taiwan?
(b) What additional considerations, other than economic ones, might be considered before making a final decision?
cwt Material Transport Cost (Houston to Taiwan)
Unit Production Cost
cwt Product Transportation/ storage charges (Houston to Chicago)
cwt Product Transportation /storage charges (Taiwan to Chicago)
Unit Import Duty
Houston plant (USA)
Outsourcing to Taiwan (Asia)
Note: hundredweight (cwt) = 100 pounds weight
Each packed shirt weight = 1 pound
Raw material weight per shirt = 1 pound
Unit Material Transport Cost = Raw Material Density/CWT
Unit Product Transport Cost = Product Density/CWT
Example: $2/100 = $0.02