Business project 623

Florida Institute of Technology Department of Extended Studies Virtual Site MGT5062-IU-SU16 Logistics Policy Dr. Paul Battaglia Please load your answer files into the Canvas assignment. You do NOT need to send an email with your solution. Assignment 05 (A05) (Beta) Case number 3 In order to help draw reasonable borders on the case, please prepare your answers primarily on the case contents and the text and other materials. That is not to say that you are limited to only the case and course materials (we are always looking for extra work or slightly different “twists” on the subject matter). Complete your answers to the CEO’s questions in narrative-type answers (MS Word or compatible). If you use a spreadsheet (e.g., Excel) for backup computations, then that is a separate file. The file extension (e.g., doc/docx versus xls/xlsx) should make the difference obvious. If you use manual calculations, then most often people scan these & paste into your document. Please include your name in (a) the file name; and (b) at the top of the first page inside each file. That helps me identify who submitted the answers, grading, etc. Example: a05-case3-battaglia.doc a05-case3-battaglia.xls -=-=-=-=-=- Adapted for use at Florida Institute of Technology – Virtual Site in MGT5062 Logistics Policy Light-Up-My-Life, Inc. Light-Up-My-Life (LUML) continues. At any given time LUNL’s standard catalogue will have about 50 different models of light fixtures. The exact number varies as the company adjusts the product line for current design trends, demand, and the like. As a reminder, LUML has a flexible manufacturing system so adjusting the product line is very easy. LUML has the ability to manufacture custom light fixtures in lots of 100 or more. Heretofore, LUML has been involved with the US domestic market. However, an architectural design firm is in the process of designing and overseeing the construction management of a pair of buildings in Hong Kong. Some 5,000+ identical light fixtures will be installed in the buildings. Good news! Because of LUML’s reputation for a quality product, LUML has been contacted and invited to submit a bid on the project. CEO Elise Ennis calls you into her office. [Small talk, nice weather, hurricane season is approaching, how about those Washington Nats – is this the year they win the World Series?] She says that she appreciated your efforts at filling in with the earlier analyses. She explains the basic scenario on this possible order. Building project in Hong Kong. Possibility of a large order. Would be the first time the company would be involved with an overseas order so no real experience. She is interested in a summary of the project; a cost estimate; and your recommendation(s) both as a logistician and on the overall possibility to pursue the order. Actual questions will be sent over later. She asks you to send her a memo to let her know the details, ok? [Once again, the “ok?” is pretty much a rhetorical question, no?] You contact Tom Smith (the architectural firm’s POC) and shortly thereafter you receive an email with the particulars that you had requested. From: Tom Smith, Clark Architects << [email protected]>> Sent: June 15, 2016 To: [you] @ Light-Up-My-Life.com Subject: Hong Kong building project – light fixtures Good talking to you today. Here is the info that we have available at the present time. #1. Require 5,400 light fixtures all of one style. WE considered three styles (A, B, and C). Style A and style B are still in active contention. As far as we can see, Style C is not going to make the cut. Decision to be made within 60 days. Need delivery in probably 5 or 6 months. I believe that Jim Smith in LUML manufacturing has the specs. #2. Ship to Hong Kong port where the construction company will take delivery before being offloaded. Regards, Tom Well, this is the first time you had heard of Jim Smith’s involvement. So you dutifully go over to manufacturing operations to talk to Jim. Jim is aware of the proposal. He explains that, yes, Clark Architects had originally said that there were three designs (style A, B, and C). He rummages through his hold-box and pulls out a piece of paper (notes that he had taken). Notes on HK building lights Style A. Basically a cylinder 11 inches high by 11 inches in diameter. The packing box has external dimensions of 12 x 12 x 12 inches. The packages cost $.60 each and weigh 1 pound. Estimated cost to manufacture is $4 each. Each fixture weighs 9 pounds. Style B cone shape. Costs $5 to manufacture. For shipping the cones can be nested in packages of six per box (padding is required so that the fixtures do not rub against each other). The external package dimensions are 12 x 12 x 48 inches. Each package costs $2 which includes the cost of the internal padding. The box weighs 4 pounds. The padding weighs 2 pounds. Each light weights 9 pounds. Style C globe shaped. Manufacturing is $6. Shipped 10 per package. Package is 12 x 12 x 50 inches. A filled box weighs 101 pounds. The package costs $3 including the internal padding. HK uses 220-240 v. AC Miscellaneous Any of the designs require minimal changes to one of our models & can be easily accommodated. Minimum order of any design is 100 so could even do all 3 designs as long as 100 of any style is ordered. As long as we know in advance, there is no extra charge for the 220-240 v AC. In our catalog, a light bulb is a standard part of the fixture. So no extra charge. Add $1 per fixture for other costs just to be on the safe side. These estimates should be good for the next 120 days. You thank Jim and head over to the shipping section. Sandy in shipping pretty excited to see someone from “headquarters”. Especially someone who wants to find out some details about shipping and shipping containers. Here you find out the following information. Manufacturing would be in the Melbourne, FL facility. ** Shipping through the Port of Miami. ** The land rate per container to Miami is $2 per mile and the trip is 175 miles. ** Because of the relatively low density, there is no practical limit to the weight of the product that can actually go into a container. However, due to highway load restrictions the load in a container cannot exceed 40,000 pounds. Otherwise the truck must be escorted and we have to pay surcharges (which balloons the cost so that LUML would not consider this option). ** In an exciting development, the ISO’s on freight containers were recently updated. Most of the 1995 editions have been replaced by the 2013 version! She suggests that as a shortcut you might find the following link to be of use. [Can either enter into your browser manually or if reading an ecopy of the case then should be able to open the hyperlink.] http://www.foreign-trade.com/reference/ocean.cfm To simplify the analysis, plan on using only standard 40-foot ocean container(s). [Note: to simplify the work use a 40-foot container even if you could actually use a 20-foot container.] ** Ocean rates from the Port of Miami to the Port of Hong Kong are $35 per ton (use 2,000 pounds). ** Insurance cost is 2 percent of the value of the shipment ready to be loaded aboard ship in Miami. ** Port charge in Miami is $350/40 ft. container. ** Port charges in Victoria Harbor are $250 per container. ** Once the ship docks in Victoria Harbor (Hong Kong) the expenses are the responsibility of the buyer. ** Looks like we should use something like the ULINE.COM H-1260 pallet. Sandy burned a copy of the pages – attached. Should buy new pallets since it costs a lot to recycle/repair a used pallet & get it cleaned/processed for international shipping. Packing & handling in the warehouse is built into the general facility operations so there is not an additional direct cost to the order. From Sandy Info from Sandy -=-=-= When you get back to your desk --- as promised – you find a note from the CEO. [Your name] Thanks for stopping by today. This order might be a good opportunity for LUML. As I understand it style C is not under consideration any longer. So concentrate on styles A & B. Here are the questions I need the answers to. Send me a memo as soon as you can Elise [Hint 1: In your memo to the CEO, be sure to answer the questions in an easy-to-find-the-answer format. For example, in my experience we do not normally tell the CEO that the answer is at attachment A and leave it at that. Hint 2: as academic work please remember to include in-text references and a reference list. Good idea even in the “real world” to have your backup ready in case you are asked a question on source, etc.]] Q1. Any other information (e.g., assumptions, facts, considerations) that you think we should know when making the decision? Q2. How many style A fixtures can be loaded into a standard intermodal container? How many containers will we need? Q3. How many style B fixtures can be loaded into a standard intermodal container? How many containers will we need? Q4. For style A, what is the total cost to LUML of filling the order up to the port of importation? Besides the obvious manufacturing and shipping costs, are there any other costs that we should consider? Q5. For style B, what is the total cost to LUML of filling the order up to the port of importation? Besides the obvious manufacturing and shipping costs, are there any other costs that we should consider? -=-=-=-= Q6. I was told that there are five basic transportation modes. Comment on the suitability of each to be considered in this order. Q7. Can this situation be considered intermodal transportation (whatever that means)? Briefly describe how the situation would (or would not) meet the definition of intermodal transportation. Q8. Describe some of the considerations in selecting the mode and the carrier. Q9. Briefly describe the “terms of sale” code that might be applied to this case. Explain the rationale for your selection. Q10. If LUML wins the contract, what trade specialists might be used to help us make the shipment? Briefly explain how/why the specialists could help us. Q11. The current exchange rate is US$ 1.00 = HK$ 7.0616. If the exchange rate changes to HK$ 7.5000, what is the likely impact (a) on the purchaser; and (b) on LUML? [Briefly] Any precautions that we should take to help mitigate the risk of a change in the exchange rate? -=-=--= Q12. Your recommendations as a logistician & overall on whether LUML should pursue this order. 9