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  • Chapter 4: Inventory Management Case Study: Supply Base Consolidation

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    Marish
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    Mountain Tent Company currently buys its primary tent component parts from three different suppliers. It is considering consolidating its supply to a single supplier to reduce costs but increase risk. Under its current policy of buying from multiple suppliers, its total annual operating costs are $185,458.80. Consolidating to a single supplier, Supplier B, would reduce total annual operating costs to $111,838.50 but increase the risks of a supply disruption. The document compares the tradeoffs between the two policies and recommends consolidating supply given the product's stable demand forecast and need for lower costs.

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    Supply chain Inventory mgmnt case study

    Original Title

    Mountain Tent Company

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    Mountain Tent Company currently buys its primary tent component parts from three different suppliers. It is considering consolidating its supply to a single supplier to reduce costs but increase risk. Under its current policy of buying from multiple suppliers, its total annual operating costs are $185,458.80. Consolidating to a single supplier, Supplier B, would reduce total annual operating costs to $111,838.50 but increase the risks of a supply disruption. The document compares the tradeoffs between the two policies and recommends consolidating supply given the product's stable demand forecast and need for lower costs.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    37 views7 pages

    Chapter 4: Inventory Management Case Study: Supply Base Consolidation

    Uploaded by

    Marish
    Mountain Tent Company currently buys its primary tent component parts from three different suppliers. It is considering consolidating its supply to a single supplier to reduce costs but increase risk. Under its current policy of buying from multiple suppliers, its total annual operating costs are $185,458.80. Consolidating to a single supplier, Supplier B, would reduce total annual operating costs to $111,838.50 but increase the risks of a supply disruption. The document compares the tradeoffs between the two policies and recommends consolidating supply given the product's stable demand forecast and need for lower costs.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 7

    Chapter 4: Inventory Management

    Case Study: Supply Base


    Consolidation
    Yang Mulligan, Marish Gnanam, Sagnik Saha, and Robert Tarantino

    Mountain Tent Company: Overview


    MOUNTAIN TENT COMPANY

    Currently buying
    primary tent component
    part from three different
    suppliers
    Compare current policy
    against single-sourcing
    from least expensive
    supplier
    Considerations:
    Annual operating cost
    Supply chain risks
    Conclusion: singlesourcing saves money
    but increases risk of

    Mountain Tent Company: Current Policy

    Annual Operating Costs of Independent


    EOQ Policy with Three Suppliers

    Supplier A

    Supplier B

    Supplier C

    Total

    Order Quantity per year


    (D)

    144,000

    86,400

    12,000

    800

    800

    800

    Shipping cost per order

    200

    60

    120

    Total Ordering Cost (S)

    1000

    860

    920

    Holding Cost (H) (per


    unit per year)

    30

    30

    30

    $92,951.6

    $66,770.1

    $25,737.1

    $185,458
    .80

    Fixed Ordering Cost

    Minimum Cost
    G*(Q ) =

    Mountain Tent Company: Consolidation Policy

    Annual Operating Costs of Single-Source


    Policy

    Supplier A

    Supplier B

    Supplier C

    Total

    Order Quantity per


    year (D)

    242,400

    Fixed Ordering Cost

    800

    800

    800

    Shipping cost per order

    200

    60

    120

    Total Ordering Cost (S)

    1000

    860

    920

    Holding Cost (H) (per


    unit per year)

    30

    30

    30

    $111,838.5

    $111,838.
    50

    Minimum Cost
    G*(Q ) =

    Mountain Tent Company: Comparison

    Annual Operating Costs: Comparison

    Mountain Tent Company: Summary


    Sole
    Suppli
    er

    Supplie
    rB
    Supplie
    rA

    Supplie
    rC

    MTC

    Current policy:
    Higher costs
    Lower risk of disruption
    Requires more planning

    VS.

    MTC

    Single-source policy:
    Lower costs
    Higher risk of disruption
    Requires less planning
    Contract terms
    Location

    Recommendations
    Recommended for consolidation:
    Major product of Mountain tent may be tents for
    trekkers and tourists
    This is a lean product with stable forecast and
    seasonal trend
    Low profit margin product so low operating cost is
    important
    invitation to edit

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