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LSC802 - Trade-off Analysis

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LSC802: Assessment 2 Trade-off Analysis Weighting: 30% In this assessment you are presented with two fictitious scenarios and, depending upon the scenario, you will use a spreadsheet approach to derive an optimal transportation mode; analyse the effect on inventory against the cost of transport; and derive and analyse the trade-off between transportation cost and customer service level. Finally, you will consider and evaluate innovative options to mitigate these trade-off decisions. Both scenarios are to be addressed and all questions answered. Scenario A The Dunedin-based CrockShop Crockery Company produces a line of crockery goods for the New Zealand market. The typical distribution plan is to produce finished goods inventories to be kept at the plant site. Goods are then shipped to comp

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Scenario A

1. Annual Transport Cost

The annual transport cost will be calculated for all the given transport services.

Transportation Cost = R*D

            From the calculations,it is clear that the transportation cost of transmitting goods through rails is the least. Through rail, the cost of transporting goods is the minimum, which is $30000. The cost of transport through the air is the maximum in this case and the cost of transportation is the main component for the selection of the mode of transport for transporting goods.The transportation cost is added or calculated in this case to determine which transport facility to be used by the company for transporting its products from the plant to the warehouse. The company will avail that transport facility, which will incur less cost than the other transport mediums.

2. Cost of Inventory

Plant inventory = I*C*Q/2

In-transit inventory = (I*C*T*D)/365

Warehouse Inventory cost = I*C'*Q/2, where C' = C+R

            From the excel table, it can be seen that the cost of goods differs at different stages of transportation. In the plant, the inventory cost is the same for every transport service, but the costs differ when it is in transit and when it reaches the warehouse. The in-transit cost is the minimum in case of air service than that of ra

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