Transportation and Inventory Cost

hwm x

I need some one to complete three question in next 4 hours…

Homework 1: Transportation and Inventory Cost 1

Question 1

JetFuel Inc. supplies jet fuel to the Seattle Tacoma International Airport. The fuel is picked up from a refinery in tanker trucks, and delivered directly to the airport’s fuel reservoir. Demand is known due to the scheduled nature of commercial aviation. Problem parameters are given in the table below:

Distance from refinery to Sea-Tac	150 miles
Truck capacity					5,00 0 gallons
Demand per day	50,000 gallons
Truck travel speed	30 miles/hour

a. Draw a diagram that shows the cumulative number of gallons against time (hours), for one 24 hour period. Assume the refinery only produces fuel for Jet Fuel and this production occurs at a constant rate. Assume consumption at the airport is constant, and the reservoir is never allowed to drop below

10,000 gallons

. Inventory held at the refinery can be as little as 0. Trucks are dispatched full.

b. On the diagram, indicate inventory held at the refinery, and inventory held at the airport.

c. Can you identify the time between production and consumption for each gallon of fuel ?

d. How large does our storage capacity need to be at the refinery?

e. Name one change that could be made to this logistics system to reduce transportation cost, and any necessary assumptions.

f. Name one change that could be made to this logistics system to reduce inventory cost, and any necessary assumptions.

g. If the transportation company has ownership of the fuel only between the refinery and the airport (not at the refinery or the airport), would the transportation company decrease logistics cost (sum of transportation and inventory) by shipping more or less frequently?

Question 2

JetFuel is thinking about serving several other municipal airports in the Puget Sound region, and one of their considerations is whether or not to build their own holding facility. The demand at municipal airports is more variable, because these airports serve private jets and recreational flyers rather than commercial airlines. The average and variance of demand is shown in the table below.

5,000 gallons

5,000 gallons

5,000 gallons

5,000 gallons

Renton Municipal Airport	Boeing Field	Vashon Municipal Airport	Ephrata Municipal Airport	Sea-Tac
Average daily demand	10,000 gallons	25,000 gallons	54,286 gallons
Variance in daily demand	2,000 gallons	1,000 gallons	0 gallons

a) By how much would the inventory held be reduced if a central holding facility was used rather than holding the fuel at each airport? Assume the airports hold 5 standard deviations, in addition to two days demand, and that you would hold the 5 standard deviations plus two days demand for the group at the holding facility. You can ignore any in-transit inventory between the holding facility and the airports.

b) Assume inventory held at the refinery is owned by the refinery, inventory in transit (between the refinery and the airports) is owned by JetFuel, and inventory at the airports is owned by the airports. Would you advise JetFuel to use a holding facility? Why or why not?

c) To design a network structure for a delivery route, what would be the most important pieces of information to consider (assuming your priority was to minimize cost)?

d) How would your decision process be different if you were delivering milk instead of jet fuel?

e) Which market (SeaTac versus municipal airports) do you think could be served at a lower logistics cost per gallon? Why?

Question 3

You are helping to design the logistics for a new online pharmacy. The company plans to deliver prescriptions directly to customers from their store at the center of a square region. Based on market research they believe there will be about 400 customers who want service during their 8 hours of operation each day, evenly distributed through the region. The company is considering 2 and 4 hour time windows, and would like to understand the cost implications of each. Assume the driver can average 25 miles/hour and requires at most 10 minutes stopping time to visit each customer. Assume the area is square with sides of 10 miles.

Calculate the number of drivers required if the company offers

1) day of delivery or an 8-hour time window,

2) morning and afternoon, or 4-hour time windows, and

3) 2-hour time windows.