The following transportation choices are available for both of these items:

A utility company with a power grneration plant in Maryland uses a special solid fuel (SSF) at an average rate of 100,000 lbs.per day. It also uses maintenance, repair and operational supply (MRO) materials at an average rate of 1,000 lbs. each day. The SSF is purchased from a producer in Texas at a cost of $0.05/lb., whereas the MRO materials are supplied by a New York distributor at a cost of $20/lb. The utility company, employing an inventory holding cost rate of $0.25/$/year, takes possession of all purchased items after delivery and maintains safety stock levels of twice the respective usage during the supply lead time for both the SSF and MRO materials. 

The following transportation choices are available for both of these items: 

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Train Supply lead time = 16 days Option 1: By the carload (100,000 lbs./carload with a shipping cost of $380 per carload 

Option 2: By full train (50 cars) with a shipping cost of $12,000 per train.

Truck Supply lead time = 4 days 

TL Rates: Large Truck (60,000 lbs. capacity) for $2,700 per truckload 

Small Truck (40,000 lbs. capacity) for $2,100 per truckload 

LTL Rates: $0.10/lb. with a minimum charge of $250/shipment for any load less than 40,000 lbs.

Estimate the utility company’s minimum average daily total relevant costs for using each of these transportation choices for the SSF and MRO materials. Determine the choice of the shipping mode, the associated shipment quantity per replenishment order and the average total relevant cost per year (assume 365 days in a year) for each of these input items.

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