Inventory Management

  

1. A company is trying to decide between using TL (Truck Load) versus LTL (Less than truck load) for ordering a certain item. The item cost is $50 for each unit, the ordering cost is $100/order paid to the supplier, and the holding cost is 20% per year. The trucking cost is $400 for TL with a capacity of 750 units of a truck and $1 per unit for LTL. Should the company use TL or LTL if the annual demand for this item is:

a) 2000 items? (Specify the most economical Q for both options and total cost)

b) 4000 items? (Specify the most economical Q for both options and total cost)

c) At what demand level both options will cost the same.