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(SCM) Case Study

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Bình Lương Phương Nhật
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118 views

(SCM) Case Study

Uploaded by

Bình Lương Phương Nhật
Copyright
© © All Rights Reserved
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Download as DOCX, PDF, TXT or read online on Scribd
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GROUP 1: CASE STUDY

Members:
1. Lương Phương Nhật Bình - K214081850
2. Bùi Gia Khanh - K21408596

Q1: Using the current exchange rate, what is the INITIAL PURCHASE COST PER UNIT (in
US Dollars) paid to Dong Hai Supply? (Do not include transportation costs).

Dong Hai Supply’s price unit is 547 ¥ per unit;


Current exchange rate: 1 CNY = 0.14646 USD
- Initial purchase cost per unit (in USD) = Per unit price * Exchange rate
Initial purchase cost per unit (in USD) = 547¥ * 0.14646USD/CNY = $80.11362
-> Therefore, the initial purchase cost per unit paid to Dong Hai Supply is $80.11362

Q2: What is the AVERAGE TIME for an order filling a TEU container to come from Dong Hai
Supply in Chengdu, China to IDC’s Alliance Fort Worth Distribution Center? From CousinsAg
in Wahoo, Nebraska to IDC’s Alliance Fort Worth Distribution Center?

● Average time for an order from Dong Hai Supply:


Processing and manufacturing time: 15 days
Rail transit time from Chengdu to Shanghai: 1 day
Waiting time at the Port of Shanghai: 4 days
Transit time across the Pacific Ocean: 16 days
Customs clearance, and unloading time in Long Beach: 3 days
Rail transit time from Long Beach to Alliance Fort Worth: 4 days
- Total average time for an order from Dong Hai Supply = 15 + 1 + 4 + 16 + 3 + 4 = 43 days

● Average time for an order from CousinsAg in Wahoo, Nebraska, to IDC's Alliance Fort
Worth Distribution Center:
Manufacturing and processing time: 10 days
Shipping time from Wahoo to Alliance Fort Worth: 5 days
- Total average time for an order from CousinsAg = 10 + 5 = 15 days
-> Therefore, the average time for an order from Dong Hai Supply is 43 days, and the average time
for an order from CousinsAg is 15 days.

Q3: Given the calculated average time in Q2, assess the percentage of all shipments from Don
Hai Supply and the percentage of all shipments from CousinsAg which will arrive at IDC’s
Alliance Fort Worth Distribution Center. Hints: standard deviation!
● Dong Hai Supply Chain in Chengdu to IDC’s Alliance Fort Worth Distribution Center:
the standard deviation of the shipping time will be 3.45 days: approximately 68% of all
shipments that will arrive fall within the range between 39.55 and 46.45 days
● CousinsAG inWahoo, Nebraska to IDCs Alliance Fort Worth Distribution Center:
the standard deviation of the shipping time will be 1.14 days: approximately 68% of all
shipments that will arrive fall within the range between 13.86 and 16.14 days

Q4: Using the current exchange rate, what is the COST (in US Dollars) to ship a TEU container
from Dong Hai Supply in Chengdu, China to IDC’s Alliance Fort Worth Distribution Center?
Rail cost per TEU exporting company = ¥12,414.5 * 0.14646 = $1,818.22767
Import tariffs and duties are $325 per TEU
Rail shipping cost from Long Beach to AFW is $2,250 per TEU

-> Cost to ship TEU container from Dong Hai Supply in Chengdu, China to IDCsAlliance Fort Worth
Distribution Center = ($1,818.22767 + 325 + 2,250) = $4,393.23

Q5: What is the ECONOMIC ORDER QUANTITY (use unit price only; do not include
transportation costs) if we purchase everything from CousinsAg? From Dong Hai Supply?

If we purchase everything from CousinsAg:


- EOQ = √[(2 * 21,500 * $105) / (32.2%*$85)] = 407 units

If we purchase everything from Dong Hai Supply:


- EOQ = √[(2 * 21,500 * $182) / (32.2%*$80.11362)] = 551 units
Q6: Identify risks that should be considered to evaluate IDC’s decision for the two supply chain
choices – CousinsAg, and Dong Hai Supply. Provide information that is required to quantify
these risks respectively
->
● Two additional risks are considered as:
a)Risk of water transport
b)Risk of currency fluctuations

● Two realistic quantitative measures for each risk that are used to evaluate:
a)Risk of water transport – Probability of water loss
b)Risk of currency fluctuations – Standard deviation of exchange rates

1. Identify two additional risks which should be considered.


- Risks of diplomatic relations between countries: when you have the possibility of selecting
foreign suppliers, a risk that is present is that the countries of the supplier and the company
break diplomatic relations during the transportation of the product.
- Lack of raw materials: another risk to consider is the possibility of a lack of raw materials
both in the national market and in the foreign market since this would lead to delays in the
delivery of the product and increased costs.

2. Provide at least two realistic quantitative measures for each risk that you would use to evaluate that
risk.
- To market with foreign countries, the country's global presence index must be taken into
account; an example could be the Elcano Global Presence Index. On the other hand, the
country's GDP can also be compared with the GDP of countries on the same continent.
- For the risk of raw material shortage, the data from each supplier's raw material availability
record must be investigated, and the flexibility regarding an incident like this on the supplier.
In addition, the number of times the supplier did not meet the demand of its customers due to
a lack of raw materials can be measured. These indices will allow us to better evaluate
suppliers and reduce this risk.

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