INTE Exam Dumps : Supply Management Integration

A company finds that delays and cost overruns are creating problems in its service contracts. To improve this situation, which of the following should the firm do FIRST?

A manufacturing firm redesigns its premier product to benefit from material standardization. The change will entail re-tooling costs. The firm conducts a cost benefit analysis on four possible options. Option 1 is to make no change at all. Options 2, 3, and 4 represent different re-tooling configurations involving different materials:

Option 1Option 2Option 3Option 4

Re-tooling Costs (Year 1)$0$800,000$1,000,000$1,200,000

Material Costs

Year 151,000,000$700,000$650,000$600,000

Year 2$1,100,000$750,000$700,000$650,000

Year 3SI,200,000$800,000$750,000$700,000

Year 451,300,000$850,000$800,000$750,000

Year 551,400,000$900,000$850,000$800,000

Total$6,000,000$4,000,000$3,750,000$3,500,000

Labor Costs

Year 1$1,000,000$700,000$650,000$600,000

Year 2$1,100,000$770,000$715,000S660,000

Year 3$1,210,000$847,000$786,500$726,000

Year 4$1,331,000$931,700$865,150$798,600

Year 5$1,464,100$1,024,870$951,665$878,460

Total$6,105,100$4,273,570$3,968,315$3,663,060

In addition to this, there will be a cost of $3.5 million in lost production during Year 1, should any of the re-tooling options (2, 3, or 4) be selected.

The firm wants to rank the options in order of financial preference, from the best option to the worst. Based on this information, how should the four options be ranked?

A company needs 1,000 widgets in Year 1 and projects that it will need 1,200 widgets in Year 2. The Year 1 order cost for widgets is $5, and the Year 1 carrying cost is S4. A recent contract renewal with the company's 3PL warehouse supplier will increase carrying costs in Year 2 to S6. How, if at all, will the Economic Order Quantity (EOQ) be affected?