Managing Supply Chain and Operations 1st Edition by Thomas Foster ,Scott Sampson,Cynthia Wallin,Scott Webb

Exercise 5

An electric motor is used to power an assembly line. The motor runs continuously at various speeds and after a certain number of hours must be replaced. A food-processing company that uses motors of this type is considering whether to purchase the motors from supplier A or supplier B. Information related to the different costs and useful life of the motors supplied by the two suppliers is as follows:

Assume that the food-processing company operates 365 days a year, 24 hours a day, for a total of 8760 hours of operation annually. Conduct a total cost of ownership analysis for the motors.