Question

Missy just took a job with a manufacturing company in Columbus, Ohio. She knew the value in performing a total cost of ownership analysis on purchases that were strategically important to the firm, because she just graduated from supply chain and operations program. She also realized that there were many cost elements besides price to consider when purchasing products internationally. She was charged with buying hydraulic hose and was to look for new suppliers overseas (mostly India and China) that would have a lower total cost than their current domestic supplier.

1.

Calculate the total cost PER FOOT of hydraulic hose given the information provided below (be careful when making the unit of analysis conversions).

• Price paid to supplier: $630 per reel (500 foot of hose per reel)

• 4 reels of hose fit on each pallet

• Pallets per container: 10

• Shipping costs: $4600 per container to the Los Angeles Port

• Duties: 5.3% the value of the container

• Customs Fees: 2.3% the value of the container

• Rail transportation from LA port to Intermodal rail hub in St. Louis: $1150

• Transportation from Rail hub to your company’s warehouse: $900 (per container)

• Internal warehouse charges (receiving, stocking): $220 per pallet

• Quality control (pressure testing, inspections): $110 per pallet

Answer 1

Additional Cost may be considered.

1. Ware house storage space charges

2. Maintenance charges to maintain temperature, humidity, cleaning and audits.