Introduction to Materials Management 8th Edition by Steve Chapman ,Tony Arnold ,Ann Gatewood ,Lloyd Clive

Exercise 2

A company manufactures component parts for machine tools in North America and ships them to Southeast Asia for assembly and sale in the local market. The components are shipped by sea, transit time averages 6 weeks, and the shipping costs $2700 per shipment. The company is considering moving the parts by air at an estimated cost of $7500; the shipment taking 2 days to get there. If inventory carrying cost for the shipment in transit costs $100 per day, should they ship by air? Why should the fact that forecasts are more accurate for nearer periods of time be considered? What activities are affected by the shorter lead time?