Supply Chain Coordination with Commodity Products
Integrated Mill
Steel Service
Center
Monthly Demand 50 50
Fixed Order Cost 4,000$ 2,000$
Holding Cost 20% 25%
Cost 1,000.00$ 2,000.00$
Sale Price 2,000.00$
Optimal Lot Size with Independent Ordering 69.28
Sum of Order and Holding Cost 41,569$ 34,641$
Material Cost 600,000$ 1,200,000$
Supply Chain Order + Holding Cost 76,210$
Material + Order + Holding Costs 641,569$ 1,234,641$
Optimal Lot Size with Coordination 101.42
Sum of Order and Holding Costs 33,806$ 37,187$
Total Order and Holding Costs 70,993$
Savings from Coordination 7,763$ (2,546)$
Total Savings from Coordination 5,217$
All Unit Quantity Discount that Does Not Increase Service Center Costs
Minimum order quantity for discount 101.42
Discount per ton above minimum quantity (4.24)$