Supply Chain Management Case

Melissa Harvey

Supply Chain Management 320

1.) I would highly recommend Jim Beierlein to implement the transportation via Air.   I used long run/dynamic analysis to arrive at my conclusion.  From the analysis we can safely say that up to and including the breakeven point of approximately 2,952,756 pounds of demand per year Air would be the most cost efficient and effective method of delivery for Senco. Because SENCO is a growing company and the projected growth annually is around 5%, after the 3rd year and into the 4th year the expected weight in pounds is going to surpass the Breakeven point.  At this point SENCO should reconsider their modes of transportation.

Yocean= (823,000-600,000)/2,500,000= .0892

Yocean=600,000+.0892x

Yair= (800,000-450,000)/2,500,000=.1400

Yair= 450,000+.1400x

2.) Break even pounds per year was 2,952,755.90.  This is the pound level at which the company would be in different about which system they would choose.  

600,000+.0892x=450,000+.1400x

(600,000-450,000)/ (.1400-.0892)=150,000/.0508

= 2,952,755.91

3.

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4.

By the end of the 4th year the projected growth will exceed the point of indifference making Air the less cost effective mode of transportation.  SENCO would then have to reconsider warehousing costs and a higher cost of inventory to accommodate the demand in America when/if they decide that the ocean is a more cost effective mode of transportation.