Type Number Consumption D Q D/Q SSD/Q HQ/2
Total Cost /
Customer
Total Cost nQ/2
Small 12 1,000 12,000 40,000 0.30 $400 $120 $5,000 $5,120 $61,440 240000
Medium 6 5,000 60,000 40,000 1.50 $400 $600 $5,000 $5,600 $33,600 120000
Large 2 12,000 144,000 40,000 3.60 $400 $1,440 $5,000 $6,440 $12,880 40000
400,000
$107,920
Total System
Cost
Current Sytem with Full Truckloads for Each Customer
Type Number
Monthly
Consumption
Total Annual
Consumption D
Optimal Order
Frequency n*
Actual Order
Frequency n
Order Size
Q=D/n
Cycle Inventory
Q/2
Holding Cost
hCQ/2
Small 12 1,000 144,000 8.56 19.80 7,273 3,636 $909
Medium 6 5,000 360,000 8.56 19.80 18,182 9,091 $2,273
Large 2 12,000 288,000 8.56 19.80 14,545 7,273 $1,818
792,000 19.8 19.8 40,000 20,000 $5,000 Total Holding Cost
Truck Size Total Q/2
40,000 $26,730.00 Total Ordering Cost
$31,730.00 Total System Cost
h 0.25
C 1
n* 8.56
S $1,350
Group all Customers on a Single Truck
This plan groups all customers into 1 delivery truck
for every order. The S becomes $350 + 20*$50 =
$1350.
Type Number Consumption
Total Annual
Consumption D
n*
Optimal
Order Size
Q=D/n*
Actual
Order Size
Q=D/n*
Cycle Inventory
Q/2
Holding Cost
hCQ/2
Small 12 1,000 144,000 4.35 33,082 33,082 16,541 $4,135
Medium 6 5,000 360,000 8.32 43,267 40,000 20,000 $5,000
Large 2 12,000 288,000 8.94 32,199 32,199 16,100 $4,025
792,000
52,641 $13,160 Total Holding Cost
Truck Size Total Q/2
40,000 $14,010.14 Total Ordering Cost
$27,170.27 Total System Cost
h 0.25
C 1
n* Large 8.94 8.94 n actual 4,024.92 14,010.14
S Large $450
n* Medium 8.32 9.00 n actual $5,850
S Medium $650
n* Small 4.35 4.35 n actual $4,135
S Small $950
This plan groups the Large sites together, the Medium sites, and the Small sites
with a delivery truck for every order. The S for the Large sites is $450, for Medium
sites is $650, and for Small sites is $950.
Type Number
Monthly
Consumption
Total Annual
Consumption D
Optimal Order
Frequency n*
Actual order
Frequency n
Order Size
Q=D/n*
Group Cycle
Inventory Q/2
Group
Holding Cost
hCQ/2
Small 12 1,000 72,000 7.63 9.90 7,273 3,636 $909
Medium 6 5,000 180,000 7.63 9.90 18,182 9,091 $2,273
Large 2 12,000 144,000 7.63 9.90 14,545 7,273 $1,818
396,000 9.90 40,000.00 20,000 $10,000 Total Holding Cost
Truck Size Group Total Q/2
40,000 $16,830.00 Total Ordering Cost
$26,830.00 Total System Cost
h 0.25
C 1
n* 7.63
S$850
This plan groups 1 Large, 3 Medium, and 6 Small
customers into 1 delivery truck for every order. The S
becomes $350 + 10*$50 = $850.
Type
Number/
truck
Monthly
Consumption
Total Annual
Consumption D
Optimal Order
Frequency n*
Annual Order
Cost with n*
Annual Holding
Cost with n*
Actual order
Frequency n
Order Size
Q=D/n*
Group Cycle
Inventory Q/2
Group
Holding Cost
hCQ/2
Small 3 1,000 36,000 8.41 1,070$ 10.00 2,400 14,400 $3,600
Medium 3 5,000 180,000 8.41 2,676$ 10.00 6,000 18,000 $4,500
Large 1 12,000 144,000 8.41 2,141$ 10.00 14,400 14,400 $3,600
360,000 11,773$ 11,773$ 10.00
39,600.00 46,800 $11,700 Total Holding Cost
23,546$
Truck Size Group Total Q/2
40,000 $14,000.00 Total Ordering Cost
$25,700.00 Total System Cost
h 0.25
C 1
n* 8.41
S$700
This plan groups 1 Large and 3 Medium together with 3 Small customers on each
truck. The 3 Small customers associated with each Large customer keep changing.
The S for each truck becomes $350 + 7*$50 = $700/truck.