A Total Cost Approach to Understanding Supply Chain RiskUsing the current exchange rate, what is the initial purchase cost per unit (in U.S. dollars) paid to Dong Hai Supply? (Do not include transportation costs.)
The exchange rate between the U.S. Dollar and the Chinese Renminbi is:
Dollar = 6.92 CNY China Yuan Renminbi
CNY China Yuan Renminbi = 0.1445 U.S. Dollar
The quoted price by Dong Hai Supply at the factory is 547 China Yuan Renminbi. Therefore, the initial purchase cost per unit is
The initial purchase cost is $79.04 for every unit (Frankel, 2013).
What is the average time for an order filling a TEU container to come from Dong Hai Supply in Chengdu, China, to IDC's Alliance Fort Worth Distribution Center? From CousinsAg in Wahoo, Nebraska, to IDC's Alliance Fort Worth Distribution Center?
Dong Hai Supply to Alliance Fort Worth Distribution Center
Dong Hai Supply order processing time = 15 days
From Chengdu rail to Port of Shanghai = 1 day
Loading at the Port of Shanghai = 4 days
Transit on ocean between Port of Shanghai to Port of Long Beach = 16 days
The unloading period at Port of Long Beach = 3 days
Time from Rail Port of Long Beach to Alliance Fort Worth = 4 days
Therefore, the total lead time for the supplier is 43 days.
For Chinese Supplier
Mean
Variance
Standard Deviation
Dong Hai Supply order processing time
15
0
From Chengdu rail to Port of Shanghai
1
0.4
Loading at the Port of Shanghai
4
2
Transit on ocean between Port of Shanghai to Port of Long Beach
16
8
The unloading period at Port of Long Beach
3
1.5
Time from Rail Port of Long Beach to Alliance Fort Worth
4
0
43
11.9
3.449638
Actual Days in Transit
28
The standard deviation as calculated above is 3.45 days.
ii. From Cousins Ag to Alliance Fort Worth Distribution Center
Cousins Ag order processing time = 10 days
Rail from Wahoo to Alliance Fort Worth = 5 days
Therefore, total lead time is a period of 15 days.
For United States Supplier
Mean
Variance
Standard Deviation
Cousins Ag order processing time
10
1
Rail from Wahoo to Alliance Fort Worth
5
0.3
15
1.3
1.140175
Actual Days in Transit
5
Therefore, the average time for an order filling a TEU container to come from Dong Hai Supply to the distribution center in Alliance Fort Worth is 43 days whereas from Wahoo, Nebraska to the distribution center in Alliance Fort Worth is 15 days.
3. Using the current exchange...
Innovation Distribution Company: A Total Cost Approach Understanding Supply Chain Risk Case The initial purchase cost per unit paid to Dong Hai Supply is calculated as follows. The current exchange rate is 1 CNY China Yuan Renminbi = 0.14646 U.S. Dollar. As pointed out, the price per unit in Dong Hai supply is 547 ¥. Therefore, the price per unit is 547 x 0.14646 = 80.11362. The initial purchase cost per unit in
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